Petroleum Pipeline Vandalism in Nigeria: Implications, causes and solutions

By Dr. Ahmed Adamu

Vandalized petroleum pipeline

It took Nigeria seven years to subjugate Boko Haram militancy in the north eastern part of the country, and this cost lives of many gallant soldiers and innocent lives, it also cost the country huge amount of money. It caused instability and economic downturn as resources that would have gone for critical sectors were directed toward fighting the insurgency. Now, with relative peace in the North-East and restoration of democratic veracity in the country, one will think the country is on the brink of stability and prosperity. Alas, the re-emergence of the Niger Delta Militancy has cast doubt once again on the ability of the current administration to overturn the socio-economic downturn in the country due to the extensive implications of the ongoing petroleum pipeline vandalisms and destruction of facilities by the Niger Delta militants.

IMPLICATIONS

The effect of this militancy is multidimensional, and include, but not limited to the followings:

1.       Revenue: The Petroleum sector contributes around 98% of the Nigeria’s foreign earnings, as such the country’s economy hugely rely on income from petroleum exports. Any shock in the supply of the petroleum will directly affect the country’s economy. As a result of the recent petroleum pipeline vandalisms, the government revenue drastically reduced by 25%. In the third quarter of 2015, the government revenue was N994.02 billion, and in early this year, it came down to around N746.99 billion. This is a reduction by N247.03 billion in just three months. This monetary loss resulted by the vandalism could have been sufficient to share N1 million each to 250,000 young entrepreneurs in the Niger Delta area. Unfortunately, this is entirely lost, and by extension led to other social cost.

Alternatively, we can look at the volume of the petroleum production to quantify the implication of these vandalisms per day. For example, at the end of the first quarter of 2016, the daily oil production in the country reduced to 1.4 million barrels of crude oil, falling short by 800,000 barrels of the estimated average daily production of 2.2 million barrels. Using the oil price of $50 per barrel, this means that on daily basis Nigeria lose $40 million, which is equivalent to N10 billion daily as a loss.

The effect of income reduction has extended to the feeble state governments, most of whom were recently rescued. And now, they had to share the lowest allocation in recent years. The state governments shared N281.5 billion in May 2016, which is 28% lower than what they shared in the month of May last year. So, the revenue reduction as a result of the vandalism will again affect the Niger Delta states.

2.       Political: The reduction in income will entirely affect the implementation of the 2016 budget, and government will have to prioritise and leave other projects. This will reduce the performance of the current administration. The political implication will be that the people will be disappointed given the higher expectation on the current administration, and voters may try other options in the next election. An average Nigerian has high tendency of blaming government for his plight, and with the current economic hardship, the government is becoming helpless especially at state levels. The implementation of the expansionary fiscal policy will be less effective, which will make the economic recovery even stickier. The popularity of the current administration will reduce if this continues.

3.       Expenditure: The cost constructing and laying down of petroleum pipeline in any oil and gas venture is huge. It will cost $82,000 to construct a gas pipeline per kilometre in Nigeria, which is equivalent to N20 million. Now, for every one kilometre vandalism, the government will have to spend N20 million to reconstruct and it may take long time to fix depending on the enormity of the destruction. This will add to the overall government expenditure in the petroleum sector and undermines its expenditure in other sectors.

4.       Default in Contractual obligations: Some of the Petroleum Fiscal Regimes require contributory payments to operator who fund the petroleum production on behalf non-operating partners in JOAs. Nigeria has so far being unable to answer operated cash calls of $7 billion as contributory payments to oil and gas operators for the risks and cost incurred in petroleum production in the country. And this was caused by reduction in the government petroleum revenue and increase in petroleum expenditure as largely caused by vandalisms in recent months.

The expensive LNG business is hugely affected. Some of the LNG supply are time, volume and destination specific, and once the contract is signed the entire risk is on the supplier. These pipelines vandalism has reduced supply of gas to the NLNG plant in Lagos, which may delay fulfilment and add to the cost and risks of the business on the Nigerian government.

5.       Environment: The aftermath of most of the petroleum pipeline vandalism are associated with environmental costs due to the oil spillage or gas emission or explosions. These cause both water and air pollution, which affect the health and economic activity of the affected community. This externality is costly and may not easily be quantified. The activity of reconstructing the damage facilities also adds to the pollution.

6.       Investment: At this important economic turning point, when Nigeria needs more investment in other sectors of the economy, the pipeline vandalisms add to the country’s business risks and sends bad signals to potential investors, not necessary in the petroleum sectors, but other sectors. So, there will be reduction in capital transfer to the country. This will weaken the effectiveness of the country’s economic diversification programme.

7.       Energy: From the beginning of this year to date, the total electricity generation has reduced on average by 30%, and this was caused by the sharp reduction in the gas supply to the power plants as a result of these vandalism. The gas powered plants provide up to 80% of the country’s power generation capacity, and they are operated mainly with gas. Any shock in the supply of gas will make these expensive power plant redundant, which will affect their viability and put the nation in darkness. The vandalism has contributed to making cost of production more expensive due to the electricity shortages that it caused. This is tantamount to discouraging local entrepreneurs and reduce their efficiencies. It will also lead to inflation as energy is an integral part of the factors of production. Any reduction in the supply of electricity will add to the cost of energy in production, as producers have to spend extra for autonomous energy supply.

8.       Refining output: With the recent deregulation of the downstream petroleum sector, the petroleum pump price has increased up to N145 per litre. However, for a litre of petrol refined and transported within Nigeria, it can cost as low as N60/ per litre. Efforts have been made to revive the existing refineries in the country so as to improve local supply and reduce cost of petrol. However, the operation of this refineries have drastically reduced as the supply of crude oil to the refineries have reduced due to the oil pipeline vandalism. This made the refineries redundant, and make the country rely more on the imported refined petroleum, which will eventually lead to further depreciation of Naira.

CAUSES

Now, one will be curious to know what motivates these militants to engage in this kind of activity that is tantamount to national destruction. So, before addressing the problem, there is need to identify the causes:

The militants are not asking for money or amnesty, they are only asking for sovereign state. They don’t want to belong to Nigeria again. But, what make them want to have a separate nation? Maybe, they think, they are politically irrelevant within the current country settings or they think someone from their region is more deserved to rule the country. The current leader of the country defeated the former president who came from the Niger Delta area, some believe that, it is a deliberate attempt to scuttle the current administration that defeated the candidate from Niger Delta. This is just a theory, and it has not been substantiated yet.

It is apparent that the militants have political motive, and is likely that they act on their own to protect the interest of some of their leaders and agitators from their region. These leaders may not have to give them orders. The representative of the region in the central government, Hon. Rotimi Amaechi lacks the command to convince the militants, because, he is considered a political sell-out.

The current administration is committed to arresting some of the former leaders of the Niger Delta agitators, prominently Mr. Tompolo, for alleged corruption in some petroleum contracts during the last administration, and despite some bloody attempts to arrest him, the government was not able to achieve that yet. The government accused him of diverting the sum of N45.9 billion belonging to the government during the last administration. However, Mr Tompolo said, it was a legitimate contract and due process was followed before he was granted the contract to protect petroleum facilities in the region, and his services were effective as there were no vandalisms or destruction at that time. If there is any question regarding the legitimacy of the contract, he said, the Economic and Financial Crime Commission (EFCC) should summon the government officials that granted the contract first. So, Mr Tompolo felt aggrieved that his Business bank accounts were frozen, and he thinks that he is innocent and the government owes him.

Mr Tompolo has an unyielding command among the armed agitators and militants in the region, and by seeing that the government is against their idol, the militants don’t need command from him to retaliate. And for them to see their mentor humiliated unduly, they rather separate from the country. There are anticipations that more leaders from the region are likely to be arrested and tried for corruption charges. The militants will do everything to protect their leaders or retaliate. That is why they first attack, because, attack is the best way of defence.

It was not coincidence that few weeks after declaring Mr Tompolo wanted, the vandalism resurface in the region. So, the vandalism is aimed at avenging the harassment on their leaders.

During the last administration, the government signed a contract with the militants that they will drop arms and stop vandalism in return for pipeline protection contracts. With the coming of this new government, this contract was cancelled, and the pipeline protection is now saddled with the Nigerian army. Despite the presence of Nigerian army in the oil production region, the militants still vandalise pipelines, because, the creek is their home, and they can navigate and ambush soldiers. The militants can even stay inside water for three hours and some believe that they use magic in their fight.

So, the justification of this fight from the militant perspective is that, their leaders were granted the contract through due process, and now the contract is reversed and their leaders are hunted for crime they did not commit. This to them, is a breach of the contract terms, and as such the condition of peace cease to exist as well, and they will have to avenge. That is why they have no further confidence on the government and the country.

With the economic hardship and unemployment in the region, it is very easy to recruit and brain wash new members in the struggle. Even though, some of the leaders are literate, but they leverage on the illiterate ones to add more forces. And it is very easy to convince new recruit by preaching political and economic isolation of the region, due to apparent infrastructural deficit and poverty in the region.

SOLUTION

So, knowing some of the causes, we can easily draw the solutions:

The government must plan for short term, midterm and long term measures. In the short term, the previous contract signed by the previous administration should be revisited with a view to identify exaggerated figures and suspicious clauses, and then sign a reviewed contract within weeks. The government must drop all charges against Mr Tompolo, and reinstate his business accounts. If government still find any foul play in the execution of the previous contract, should invite government officials from the previous government for inquiries. In addition, heavy military power has to be deployed to prevent any further destruction.

In the midterm, the President must personally meet with the influential agitators from the region. The President should not rely on the regional representatives in his cabinet, he must engage with the former president and invite all the agitators for a peace talk. The president must agree not to arrest or try anyone of them for any crime committed in the past. The president should consider some political appointments to few of their respected leaders, whom they listen to. In return, they must drop arms and help the Nigerian army protect the pipelines and other petroleum facilities. The President should use power to convert enemies to loyal friends.

Any special consideration for the militants has to be done moderately and strategically not to promote violence for economic benefit. The special consideration will have to be through investment in education, agriculture, and environment to increase the inclusive economic participation of the young people from the region. The Amnesty programme of President Yar’adua was very effective and it has addressed the economic motive of the militancy. The current vandalism is politically motivated, so there is less need of monetary investment on the militants.

There is need for general awareness and campaign for social cohesion and tolerance, as well as regional integration. The six regions are integral part of each other, and the young generation must appreciate the contribution each region give to achieve the Nigeria of today.

There is need for awareness to understand the national and international laws of land and natural resources. All minerals and natural resources on land and in sea belong to the Nigerian state, not to any particular state or region. And the sea where the oil and gas operation take place belong to the Nigeria, because, nobody can own a sea except the government. Nigeria is lucky to own a longer nautical miles in the sea because of its wider land mass. So, even the north that contribute 72% of the land mass, which resulted to wider sea ownership to Nigeria, cannot claim ownership of the petroleum deposit in the sea. So, petroleum resources within the country’s territory belong to Nigeria exclusively. 

The theory that groundnut money were used to build oil wells may not be substantiated, as the beginning of petroleum industry in Nigeria was based on concessionary fiscal system, where international oil companies invest their money in exploration, development and production of the petroleum resource. Commercial discovery and production of oil was first made in 1956 in Oloibiri (in present Bayelsa state) by Shell D’Archy, not by Nigerian government.

In the long-term, the Nigerian economy must be independent of petroleum sector, to avoid being vulnerable to any shock in the sector. Alternatively, petroleum deposits can be explored in other parts of the country to diversify its sources of supply. Development of renewable energy sources can be another option.

It is just my opinion!

Dr. Ahmed Adamu,

Petroleum Economist and Development Expert,

Pioneer Global Chairperson of Commonwealth Youth Council,

University Lecturer (Economics) at Umaru Musa Yar’adua University.

                                             

President Buhari’s One Year in office: Economic assessment and public opinions on national and states’ performances.

President Buhari immediately after taking
oath of office, 29th May 2015.

By Dr. Ahmed Adamu

The following article reviews the economic performance of President Buhari in his first year in office, but it first reports and analyses the outcome of a public survey I conducted to crowdsource public opinions on the one year performance of President Buhari and state governors.

The survey was conducted online and lasted for 48 hours. The participants in the survey came from across the 34 states in the country, even though some 24 of them withheld the name of their states. The outcome of the survey differ from states and regions. There were some discrepancies in national and states outcomes. Only Oyo, Ondo and Ebonyi states did not participate in the survey.

Starting with the aggregate outcome, 53% of the respondents are satisfied with the President Buhari’s one year in office, and most of them think his policies are not extremely effective, but just effective, and 18% of them think his policies are not effective. 43% of the respondents think his policies are inclusive, while 15% of them think they are not inclusive. 86% of the respondents still have hope for the future under President Buhari. There are more of the respondents who think their state governments performed poorly or could not decide yet.

Majority of the participants from 9 states out of 13 southern states are not satisfied with the administration of President Buhari in its first one year. However, majority of respondents from 10 states out of these (southern) states think that their state governments performed either excellently or good. However, 100% of respondents from Bayelsa state think that their state government performed poorly. Likewise, 55% of respondents from Delta state think their state government performed poorly, and 66% of respondents from Abia state either think that their state government performed poorly or are indecisive. Majority of respondents from 5 southern states are still not hopeful for the future under President Buhari, and some majority from 7 states in the south do not have confidence in the competence of political appointees under President Buhari’s first one year in office.

All the 19 northern states participated in the survey, and majority of the respondents from 16 of these states are extremely satisfied with the first one year of President Buhari in office.  However, 100% and 77% of participants from FCT and Jigawa state are moderately satisfied with the government of President Buhari in the first one year respectively. Furthermore, 43% of participants from Taraba state are not satisfied with President Buhari’s one year in office, and another 43% of the participants from the state are moderately satisfied.

In terms of states performances, majority of participants from 10 northern states think that their state governments performed poorly. The poor performing northern states from the responses of this survey include Bauchi, Benue, Borno, Jigawa, Katsina, Kwara, Plateua, Taraba, Yobe, and Zamfara. Specifically, 100% of respondents from Zamfara state think that their state government performed poorly.

Respondents from Adamawa, Kaduna, Kano, Kebbi, Kogi, Niger, and Sokoto think that their state governments did not perform excellently, but performed just well. There are more perceived poor performing states in the north than in the south in the first one year of the current administrations, but they are largely more hopeful for the future and they are confident in the competence of the political appointees.

There are few shocks in the above discoveries, and that is important in identifying areas of weaknesses and strengths. The survey was based on general performance devoid of specific sectors. 

Even though there have been social and print media reports scoring the performance of the current administration in various sectors, I think they are not without sentiments. There are sectors that require intensive and strategic planning and implementation before witnessing any progress. So, it is not fair to judge the current administration on some major development indicators considering the fact that, it has not implemented any of its blue prints and plans yet, as the first budget of this administration has just been approved. Similarly, considering the economic situation inherited by the current administration, it will take time and patience to fix some of the infrastructural deficits and economic downturn.

The porous Nigerian economy has already responded to the global economic slowdown and have already imported inflation and unemployment. Of course, the current administration was not responsible of making the economy porous. It is the effect of long term mismanagement of resources and reliance on one sector i.e. Petroleum Resources. And recovery from this resource curse will definitely be long and slow. It is going to be a slow growth. The pace of economic downturn is always faster than its recovery.

Looking specifically at the inflation index, when President Buhari came on power, the inflation rate was around 9%, and at the end of his first one year it rose to 13.7%. This could be the repercussion of the much helpless economy built over the years and its vulnerability to foreign currency exchange shocks. With the recent sharp depreciation of Naira resulting from rising importation, the cost of importation became higher, and this caused increase in general price levels. Similarly, payments for some contractual obligations in foreign currency especially for foreign capitals invested in the country have become more expensive (due to Naira depreciation), causing increase in the cost of goods and service provisions especially in power sector. And this significantly affected prices. So the inflation is explained by the resultant effect of a porous economy (Naira depreciation) built over a decade. So, the currency depreciation was not caused by effects of the current economic policies, it is the remanence of the long ineffective policies.  

In terms of Job opportunity, the current administration promised to create 3 million jobs in a year during their campaign, but the unemployment rate has increased by 4.6% within a year, with new unemployed people numbering around 1.5 million joining the labour market in just the first quarter of 2016. This is not surprising due to the delay in the implementation of the expansionary fiscal policy, which the Buhari’s administration has to be responsible for. Likewise, job creations by organised private sector has dropped due to increasing cost of production and delay of investment as a result of recent political transitions and uncertainty in the new economic policies. Similarly, the proposed fiscal policy that will convert unemployment cannot be fully implemented without the passage of the budget. These explained the negative economic growth in the first quarter of this year.

The Central Bank of Nigeria has already injected close to N2 trillion in to the economy, and some banking population already possess enough resources to create jobs. Even though, the effect of this cannot be visible immediately, as people make investment decision as when they deemed optimal. However, with the recent passage of the budget, the government spending will commence, which will immediately create jobs and put more money on the hands of common man, which will increase their purchasing powers. So, there is need for at least a year to generate more jobs and distribute money through government expenditure within the framework of the first budget of this administration.

Within one year of President Buhari, the foreign reserve has declined by $5 billion, which can easily be explained by steep reduction in the crude oil prices and reduction in production of the crude oil due to vandalism. In addition, the rising importation and slow global economic growth has resulted to more utilisation of the reserve to offset local and international liabilities in foreign currency. So, any inability that reduction in the reserve may cause was apparently not as a result of the recent economic policy, but external factors.

In terms of electricity generation, it is evident that in just 2016, the average power supply has declined by 30%, this was largely caused by the shortage of gas supply to power plants as a results of gas pipeline vandalism. It is significant to note that the highest ever electricity generated in the history of the country was 5,074MW, which was generated on 2^nd February 2016. But period after this was characterised by some few inevitable system collapses and pipeline vandalism, which lowered the generation to around 3,000MW daily at maximum.

It is apparent that some of the setbacks above are caused by some externalities and inherited weak economic systems, which the current administration must strive to address before building a new economy. So, this will require tough decisions and slow growth before the economy can pick up. This underpins the necessity to have more of economic advisers than luxury or political aids. The government must have the guts to tell the negative truths, and explain clearly and specifically the situations, and what the government plans to do to address them. Apology and keeping hopes alive cannot serve well, we have to be honest to ourselves and face our challenges together.

Some of the first year assessments of President Buhari are myopic and misguiding. For example, the Punch newspaper illustrated that, President Buhari performed poorly in electricity sector. This is not valid assessment due to above explanations under electricity generation. Even if this government will have to improve in electricity generation, it will take 2 to 3 years and huge amount of money to install new generation and transmission capacities, which the government cannot finance alone. Funds for power projects must be appropriated, and private investors must be wooed, which all cannot yield result in just a year.

It is apparent that, the economy is not so attractive, and giving excuses and blaming the past should not distracts the government. The government has done well in the area of tackling corruption, which made all other gained achievements possible, including security, financial prudence, efficiency of public institutions, patriotism etc. It requires an honest leader to fight corruption, which President Buhari is, so it is easy for him to fight corruption, and this is why he performed well in fighting corruption. 

Finally, it will take pains and patience to see the much needed positive change. Priorities must be set especially in energy and transportation, which is why there is need for separation of duties. No matter how much government want to minimise cost, it must share responsibilities to optimise quality outcome. It will be better to have separate ministries for power, housing, works, and youth. Similarly, the petroleum ministry require robust attention, as such it requires a substantive minister whose specific assignment will be the petroleum sector. 

Dr. Ahmed Adamu,

Petroleum Economist and Development Expert,

Pioneer Global Chairperson of Commonwealth  Youth Council,

University Lecturer (Economics), Umaru Musa Yar’adua University Katsina.

President Buhari's One year assesment Form

President Muhammadu Buhari

29th May 2016 is the one year anniversary of Muhammadu Buhari as President of Nigeria. This evaluation helps to review government performance, and crowdsource opinions and reaction of the citizens on the current administration in the last one year. To participate in this voluntary and independent assessment, fill the following form.

This  survey is closed. No further submission will be valid

How satisfied are you with the one year of President Buhari’s administration?

How would you assess the effectiveness of the government policies in the first one year?

How inclusive do you think of current government policies, programmes and approaches?

How confident are you in the competences and abilities of the political appointees?

Do you have hope for the future under the current administration?

How would you rate the performance of your state government in the first one year?

Which state are you from?

Implications of Nigeria’s Floating Exchange Rate Regime: Way out

By Dr. Ahmed Adamu 

Following the decision of the Monetary Policy Committee (MPC) to fully implement the floating exchange rate regime in the country to allow competitive access to foreign currency and introduce flexibility in the currency exchange market, the economy will face certain shocks, which if not carefully managed will further endanger the economy.

With this new policy, the value of Naira in relation to foreign currency will be determined by demand and supply, which means the new value of Naira will be closer to, if not exactly as its value in the parallel market. The parallel market have been influenced by the forces of the demand and supply. So, there will be relatively similar naira values in the Forex markets. The government will not therefore fix the exchange rate, which normally distort the currency exchange market at the expense of the government.

Therefore, the value of Naira will immediately depreciate since at the parallel market which is the proxy competitive market, the Naira is sold around N350 per US dollar. This will mean Naira will now reach a market value of not less than N300 in the short term, which is up to 76% increase. This market adjustment will cause uncertainty and speculations, which will further depreciate the value of Naira. However, this policy will motivate more supply of foreign currency, making currencies like US dollars and Pound Sterling overflowing the market, because of the profit motive. The foreign reserve which has depleted by more than 130% in eight years, will then be relieved, as the resulting increase in interbank and Bureu De Change (BDC) transactions will cause increase in currency supply, which will offset the rising foreign currency demand. The increase in supply will also make importation easier but not cheaper.

Therefore, as the foreign currency supply curve shifts outward, its demand curve will follow it outward, moving the new equilibrium value at a higher position. And this may continue in the midterm except drastic structural economic changes took place, which will include measures to reduce importation especially of refined petroleum, which constitute the largest share of import to the country.

Under the previous fixed exchange regime, the central bank had to use the foreign reserve to meet up the market gap (excess demand) caused by import demand. The fixed exchange regime is not realistic for importing countries like Nigeria, as the continues oversupply of the country’s currency will continue to depreciate the value of the currency. And this leads to increase in the inflation and depletion of the foreign reserve.

So, setting the Naira at competitive value will cause depreciation of the currency, due to continuous rising importation in the country, every other thing being equal. So, we should expect further sharp decline in the value of Naira, which may likely reach somewhere around N500 in the midterm, and then it will stabilise.

Another implication of this is the suppression of the black market, as buyers and sellers can accept the interbank equilibrium rates, which are not so much different from the black market value. So, buyers and sellers will avoid the street and walk into banks for any transaction. The BDC will now compete with the banks, giving customers supplier options. Even though, the black market will not seize to exist yet, as they will still push frontiers of their prices no matter the efforts and there will not be convergence.

The need for strict regulation is imperative under the currency competitive market to ensure fair play, so that the economy will not be jeopardised for the benefit of profit seekers. Similarly, the cost of importation will immediately increase as more Naira is required to acquire a unit of foreign currency. In addition, the country will be more vulnerable to foreign inflation (imported inflation). These will lead to cost-push inflation, and with the already 13% inflation rate, the inflation may reach 15% in a near future. Consequently, local industries will underperform due to expensive factor inputs.

The prices of goods and services will continue to skyrocket, and no matter how much efforts are put in place to bring prices down, the price downward slope is going to be sticky and slow. Even though, the government will have window opportunity to acquire foreign currencies at concessionary rate to settle some critical responsibilities, still the cost of government will increase, as government will have to spend more in paying its local and external liabilities.  As a result, the performance of the government will reduce.

With the recent removal of subsidy, the cost of importing petrol will increase, which will push the ceiling price from N145/litre to around N160/litre depending on the crude oil price and stability of the exchange rate. The electricity tariff may also increase as more Naira will be required from the Discos to settle payments to some foreign Gencos in foreign currency.

So, this is Naira devaluation in disguise despite the president’s outright rejection of devaluation. However, whether to devalue or not to devalue, the economy is in danger due to continues reliance on importation of almost everything. So, the expansionary monetary policy will not alone stabilise the market unless it is accompanied with strategic public and private investment in critical areas like refineries, agriculture, automobile and machines production, technology, textiles, education and health. Once Nigeria can independently meet its local demand for these goods and services, the value of Naira can appreciate to even N100 per US dollar. Nigeria has the potential to achieve this, since the country’s exports still outweigh that of its import. Even though, the country is the 52^nd largest importer in the world, but with its average annual import growth of 3.2%, this position may reduce over time.

Finally, strong measures must be in place to encourage local investors and producers, and provide the environment for their prosperity, importantly adequate provision of energy. In addition, the MPC should consider increasing the Monetary Policy Rate (MPR) to catch up with the inflation. The MPR should be increased to encourage savings, and reduce money in circulation to quell the pending rise in inflation. 

Dr. Ahmed Adamu,

Petroleum Economist and Development Expert,

Pioneer Global Chairperson of the Commonwealth Youth Council,

University Lecturer (Economics) at Umaru Musa Yar'adua University Katsina.

Petroleum subsidy saga and solutions

Picture of a government owned
filling station selling at new
ceilling price

By Dr. Ahmed Adamu

Recently, the Nigerian government once again removed subsidy on petroleum consumption in the country, on the account that setting the price at equilibrium will ensure optimal supply, competition, and end the illicit trade of the Nigerian subsidised products in the neighbouring countries. This sparked lots of comments and different opinions, and this article will shed more light on the subsidy and its flip side with some recommendations.

Petroleum subsidy existed for long time and in many countries, especially oil rich countries as it serves as the direct benefit citizens drive for having petroleum deposits in their countries. Initially, the subsidy was economically introduced to support structural changes in economies, and encourage usage and shift to more efficient technology and fuels. It was introduced in petroleum sector to enable access to cheaper factors of production, so that factories and industries can buy petroleum products and transport their products cheaply. This helped in quelling inflation, and increased investment. The subsidy also protected consumers from the volatility of the petroleum products prices.

Nigeria being one of the leading oil rich countries in the world introduced subsidy for over two decades, and for many Nigerians, they do not know how to live without the subsidy. As a result, any attempt to remove the subsidy is followed by protest and unrest. Recent of which is the 2012 subsidy removal. With the latest removal, some Nigerians still think, it is a wrong decision or bad timing, and may consider going to the streets, and the Nigerian labour union has already expressed dissatisfaction with the decision.

However, within Nigerian context, the subsidy was considered unbearable due to the increasing consumption of the petroleum products, which make the government spend up to a trillion Naira in just a year for subsidy payment. The petroleum subsidy regime had created avenue for corruption adding more to the subsidy cost. The subsidy payments keep increasing year by year, which could reach N2 trillion in two years time due to the increasing demand for local consumption, corruption and illegal exportation of the subsidised product. This has affected the government’s performance in major sectors of economy, and if allowed to continue will affect future economic growth. This can be worse if Naira continue to depreciate, as Nigerians have to pay more in local currency to import a unit quantity of the refined petroleum product.

The petroleum subsidy in the country was not targeted as even the rich people who could comfortably buy at competitive price still enjoy the subsidy, and yet, they consume more than the poor. So, the subsidy benefited the rich more than the poor.

Similarly, providing the subsidy has caused market failure as setting prices below the equilibrium, will cause excess demand, where consumers will be willing to buy more than the suppliers are willing to supply. Supply of petroleum products under regulated petroleum prices are discouraged as the suppliers are attracted to higher or competitive prices. So, the subsidy causes market imbalance, which is not desirable.

With the recent reduction in crude oil prices, the Nigerian foreign earnings reduced drastically, which depleted its foreign currency reserves, and resulted to its failure to meet local hard currency demand. This affected supply of the petrol, as marketers could not secure sufficient US dollars for the importation. This has caused further market imbalance, as it caused lower supply. So, the government is left with no option than to allow marketers with autonomous sources of foreign currency to import and sell at competitive price. Even though, access to local currency is not lacking, but lack of its convertibility has compounded the situation. So, foreign currency shortages made the market monopolistic, as only few marketers with independent sources can import, and this elongated the distribution chain, and increased the pump price.

Being someway monopolistic market, the anticipated competition may not come easily due to the reliance on few ways to acquire foreign currency, and due to the capital intensiveness of the petroleum importation. So, there might be cases of collusion to exploit consumers, which has started manifesting in some parts of the country. So, the country is seriously hit by resource curse, since despite its resource availability, it heavily imports most of its consumables, making supply of its local currency higher than its demand. Similarly, the too much sentiment and profit seeking in the industry make distributors aim for higher profit above the normal profit. The marketers must be sincere and sympathetic, as they are leaders in their own right, they should go for as minimal profit as possible. The consumers can play their role, by boycotting any filling station selling above the ceiling price.

Without the subsidy, any future inflation of petroleum products will be transferred to the citizens. However, if there is deflation, the government will not have the chance for over recovery, so the citizens will enjoy the price reduction directly. The removal of the subsidy will relief the government and enable it reinvest the saving on social responsibilities. It will set prices at equilibrium, and allow for free market. Suppliers will now be more motivated to import, and as a result, there will be more supply of Naira, which will further depreciate Naira. This will make the country spend more for every import, making factor inputs more expensive, leading to inflation.

 However, the removal will ensure energy conservation and efficiency, which will be useful to environment. Without the subsidy, unnecessary consumption of petrol will be reduced, which will lead to reduction in aggregate petroleum demand, and in the long run lead to petroleum price reduction. So, even if the price is high, people will reduce their consumption, and may not have significant effect on the total spending.

Despite the historical unrests and protests resulted from past subsidy removal, the country may not experience serious protest this time around, due to the unyielding trust and confidence on the current leader of the country, but the question to ask is, how would the Nigerians cope with the subsequent increase in price of petrol and other commodities, since incomes did not appreciate in the same proportion. Similarly, the resulting inflation will add to the cost of production and unemployment. So, to avoid serious hit on citizens, measures must take place to alleviate the looming catastrophe.

The removal of subsidy should have been systematic and gradual in phases, this will then prepare the consumers and make them adapt to new prices gradually. The continuous saving should then be reinvested in physical social projects that will justify the opportunity cost of the fuel subsidy. The price control measure must be in place and compliance enforced. The price of petrol should be flexible to reflect the volatile crude oil price timely, this will avoid over and under recovery. There must be strict supervision to checkmate cost composition and price compliance.

For example, this week, the NNPC announced that the maximum price of petrol is N145, which is the peak price. Even though the allowance is huge, but it does not mean all filling stations must sell at this price. The price at each filling station must be determined by their specific landing cost and other associated cost, but not above the N145 presently. This means, the price can be far lower than N145, and still viable. This peak price should be reviewed regularly. So, each supplier should declare their cost composition and selling price, and supported with evidence before acquiring a selling clearance, this will help avoid excessive maximization of profit.

In addition, the government should design programme (palliatives) to offset the price shock, for example, provision of monthly subsidy ticket for 60 litres per eligible consumer/car can be provided for at least six months in the beginning. The eligibility to benefit from this subsidy ticket is subject to economic status of the consumer and per vehicle. Ticketing shops can be established in each town, and this should be secured and trackable. For vehicles to benefit, they must be properly registered and renewed with the Road Safety Commission for verification. The beneficiaries must be honest, and only purchase the subsidy ticket if they are eligible, and they should not go beyond the 60 litres per month. The commercial vehicle subsidy quota can be extended to 200 litres a month. The filling stations can cash the served subsidy tickets at the relevant government agency. The transport fare must then be regulated per kilometre, this can change based on the prevailing peak price. The provision of convenient public transport, within and between states and towns must be provided, so that people can start selling their cars and go for these conducive public transport options.

The default long term solution will always be to sufficiently refine the Nigerian crude oil within its territory. This will evade the exposure of the fuel price to the exchange rate fluctuations and shortages in foreign currency reserves. It will also drastically reduce the refinery acquisition price and eventually the pump price. If Nigeria can sufficiently meet local petroleum demand without the need to import, the fuel pump price may reduce to about 30-40%. This can be much lower if government will consider subsidising the refining by then.

Currently, it will cost N138.26 to bring a litre of petrol to a filling station in Nigeria at the current crude oil price and exchange rate. So, it will still be profitable even below N145. So, it is a policy that, no litre of petrol should be sold above N145. Unfortunately, I just took petrol at N150 per litre. And I asked the manager of the filling station, why he sells at higher price than the peak price, and he said he bought it at higher price from a dealer. So, there is need to reduce the chain of supply to reduce too much profit seeking. Allocation or wholesale of petroleum products should only be to owners of filling stations, and they must show evidence of sale at their filling stations before they can be sold again.

Many countries that were providing subsidy have now removed it, for example, Venezuela provided the cheapest petrol in the world as a result of its petroleum subsidy. Despite having the world largest oil reserves, Venezuela stopped providing subsidy, and as a result, the price of petrol in the country rose by about 6000%, which is the first rise in 20 years. Though, 95% of foreign income of the country come from crude oil exports, the country had to use the revenue to subsidise consumption of petrol, which reduced the government capacity to invest in other sectors of the economy. Now Venezuela is facing economic recession, inflation of around 95%, hunger and unemployment.

Finally, since people are used to subsidy, removing it will be very sensitive, as such, the removal must be democratic to engage and convince citizens on the need to remove it. There should be immediate manifestation of resulting benefits after removing the subsidy, and the removal has to be gradual and targeted. It was envisaged that no country will give fuel subsidy in the next 10 years, due to increasing demand for petroleum products and the need to diversify the energy mix. So, the Nigerian subsidy removal should be restructured and revisited to make it systematic, gradual and clearly beneficial, targeted and inclusive. 

Dr. Ahmed Adamu

Petroleum Economist and Development Expert

Pioneer Global Chairperson of the Commonwealth Youth Council

University Lecturer (Economics) at Umaru Musa Yar'adua University, Katsina.

The need for a bill to lift the ban on land importation of Rice

Nigerian Customs officials intersecting truck full of imported rice

This is the letter I will send to a Senator requesting him to present a bill before the national assembly on the need to lift the ban on land importation of rice. Let us discuss it and have more suggestions before I deliver it to the National Assembly.

Dear Senator

In one of my recent articles titled: “Rising Inflation and Unemployment: The Answers” (Here is the link to the article: http://ahmedadamu.blogspot.com.ng/2016/04/rising-inflation-and-unemployment.html ), in the article I raised the issue of the recent food price crisis and unemployment in the country. I mentioned that the Nigerian inflation rate is now 12.8%, which is higher than what it was (8%) in 2014, this is evident in the prices of common consumer goods. Now, household commodities like tomatoes, rice, egg, milk, spaghetti, maize, matches etc. have all risen, some even doubled their initial prices.

People now adjust their life styles and downgrade the quality of foods they eat, and this affect the performance of the economy as the aggregate demand keep reducing. In addition, the increase in inflation supposed to have been triggered by increase in employment opportunities in the short run, but that is not the case in Nigeria, as the unemployment rate increased together with inflation.

We are concerned with the potential hardship that people may face if this price increase prolong. Particularly concerned with how government’s decision of banning land importation of rice has caused the scarcity and price increase of the rice, which is essential food item among average household. This made some of the poor to switch to lower food options or pay extra money from their savings to pay for the rice. This affect the general aggregate demand in the country.

Therefore, to address part of the food inflation, the government should lift the ban on land importation of rice. If rice is still imported through the sea, then it should be allowed to be imported through the land. What the government should do is to take measures to track and organise the land rice importation, so as to generate revenue from import taxes. Before the banning of land importation of rice, the Nigerian government receive huge amount of revenue amounting to close to N300 million per month, which is around N3.6 billion per year. So, now government is loosing this amount due to the ban.

Even if some of the importers avoid payment of tax, that will still benefit the economy, because, if they did not pay the tax, they will be able to save some money for other expenses, which will improve aggregate demand and help other businesses grow. The tax evaders may likely reduce the price of their rice due to the reduction of the landing cost following tax evasion. This will help in bringing the price of rice down. However, government should take extra measures in the midterm to ensure compliance and payment of tax by those tax evaders.  

However, there should be provisions and incentives for rice farming locally. The price of domestic rice should be subsidised so as to discourage buying foreign rice. The local farmers shall be incentivised to have easy access to capital and suitable farming locations for rice, so as to encourage local rice production and discourage its importation. If there is abundance of local rice production, then the entire rice importation can be banned. The current ban on land importation of rice has led to the scarcity of rice, unemployment and rise in rice price. It is discriminating to ban small-scale importation through the land if large sea importers are still allowed to import. Therefore, government should lift the ban on land rice importation in the short term before the effects of new measures and investment in local rice farming start to manifest. This will evade the expected acute increase in rice price, ahead of the fasting period.

I hope you will accept this propose bill and present it to the National Assembly for Consideration.

Dr. Ahmed Adamu

Petroleum Economist and Development Expert

Pioneer Global Chairperson, Commonwealth Youth Council

University Lecturer (Economics), Umaru Musa Yar’adua University, Katsina.

Rising Inflation and Unemployment: The Answers

By Dr. Ahmed Adamu

Indicator of trend fluctuation as
characterized in the inflation trend

The Nigerian inflation rate is now 12.8%, this is higher than what it was (8%) in 2014, this is evident in the prices of common consumer goods. Now, household commodities like tomatoes, rice, egg, milk, spaghetti, maize, matches etc. have all risen, some even doubled their initial prices. This is on top of the scarce and expensive petrol. It is also happening at a time when there are more money in circulation. Currently there are close to N2 trillion in circulation, which means people have more money, but the question is how many of these people possesses the money. Despite the increasing money in circulation, people still struggle to afford the expensive consumer goods.

People now adjust their life styles and downgrade the quality of foods they eat, and this affect the performance of the economy as the aggregate demand keep reducing. In addition, the increase in inflation supposed to have been triggered by increase in employment opportunities in the short run, but that is not the case in Nigeria, as the unemployment rate increased together with inflation.

This indicates that there are more people without jobs, and prices of goods and services have increased. People can easily think there is stagflation in Nigeria, but that is not the case. If the natural rate of unemployment in the country is known, we would have been able to discover if there was trade-off between slight reductions in natural unemployment rate with the increasing inflation rate. However, with very little increase in the unemployment rate, which is a marginal 0.5%, we can assume there is reduction in the rate of natural unemployment.

This is because, the number of people without job due to lack of skills or due to the waiting period have reduced. Even though, there are increasing number of unemployed people due to low growth of the economy at the interim.  This is possible because the speed of the economy has reduced by 0.73% within the period of last quarter of last year and first quarter of this year. So, the marginal increase of unemployment rate was a result of slow growth of the economy, though the natural unemployment can be said to have reduced slightly.

Therefore, we can conclude that increase in inflation in Nigeria was as a result reduction in the natural rate of unemployment within this period. Because, demand for higher wages and external factors like the sudden shock in petrol price, higher import cost and sharp reduction in electricity supply might have triggered the recent increase in inflation. However, if the trend continues, the increase in inflation will cause more unemployment in the future, as producers will find it difficult to acquire factors of production and make their profit low due to the resultant low consumption.

Even through, there is more money in circulation, but yet, there is less money in the hands of average Nigerians, and the effect of reduction of money in circulation will be minimal as it will further reduce the money in the hands of the average citizen. So, the monetary policy shall not affect the money supply, but reduce the interest rate to encourage more investment. Reduction of the interest rate will compel the few that hold so much money to bring out their money from the bank and invest, and if they invest, they will employ labour, and this will address the unemployment. In addition, there have to be measures to checkmate inflation sentiment and undue maximization of revenue by suppliers. The price of petrol has to be strictly regulated to ensure affordable competitive price, so that raw materials can be acquired cheaply.

The recent depreciation of Naira to US dollar has made the cost of import prices higher, so, importation especially of refined petroleum products should be totally eliminated in midterm. This will drastically reduce the inflation rate, and provide more employment. Since there is no effect of wage increase on the current inflation rise, the regulated wages shall be maintained for now until when inflation rate is cut down to about 5%.

With the current China/Nigeria currency deal, we will expect cheaper cost of production and reduction in inflation, as cheaper raw materials can be imported from China at the short term. However, if this is also prolonged, there will be resurgence of inflation as cost of importation will be higher with continues overdependence on China raw materials.

Finally, on a related note, to address part of the food inflation, the government should lift the ban on land importation of rice. If rice is still imported through the sea, then it should be allowed to be imported through the land. What the government should do is to take measures to track and organise the land rice importation, so as to generate revenue from import taxes. However, there should be provisions and incentives for rice farming locally. The price of domestic rice should be subsidised so as to discourage buying foreign rice. The local farmers shall be provided with capital and suitable farming locations for rice, so as to encourage local rice production and discourage its importation. The current ban on land importation of rice has led to the scarcity of rice, unemployment and rise in rice price. It is discriminating to ban small-scale importation through the land if large sea importers are still allowed to import. Therefore, government should lift the ban on land rice importation in the short term before the effects of new measures and investment in local rice farming start to manifest.

Dr. Ahmed Adamu,

Petroleum Economist and Development Expert,

Pioneer Global Chairperson of Commonwealth  Youth Council,

University Lecturer (Economics), Umaru Musa Yar’adua University Katsina.

Speech delivered by Dr. Ahmed Adamu on the importance of literature during the launching of a book titled Tears of Agony on 17/4/16 in Katsina.

Speech delivered by Dr. Ahmed Adamu on the importance of literature during the launching of a book titled Tears of Agony on 17/4/16 in Katsina.

Dr. Ahmed Adamu presenting his speech during the book launch
(more photos below)

Writing books is very important, and is a culture that we promote and encourage among youth. It enhances one’s creativity and enhances mental stimulation, and this builds the brain’s capacity and imagination. When someone writes a book, he is transferring knowledge, experiences and in many times good characters/lessons. By writing, one is making good use of his time, and which will earn him economic benefits and recognition.

There is a myth that says, if you want to hide something from Africans, put it in a book. This remain a myth, but to some extent it is true, because, some of our young people lack the culture of reading. You will see young people wasting time sitting on the streets or under the trees arguing, gossiping and playing games. This is huge waste of time. They should have engaged in reading  to improve their knowledge. There are so many benefits of reading and some of these benefits include:

1.       Mental Stimulation: Just like any other muscle in your body, your brain needs to be exercised, and reading makes your brain to engage in imagination of what you are reading, which enhances its strength and speed of comprehension.

2.       Stress reduction: Some young people play games when they are stressed, not knowing that reading can give them the free entertainment, as they read stories and information that may please their minds.

3.       Knowledge: the more you read, the more you learn. Always, there are things you never know about, and you can know about them when you read. So, your basket of knowledge increases once you read. And if you have knowledge, you will be elevated in society, people will respect you and you will attain higher positions.

4.       Vocabulary Expansion: Especially books written in foreign languages, e.g. English Language, the more you read English books, the more you come across new words, and you will learn how to use them and how to spell them. This will help you to develop effective communication skills. It will also help you develop better writing skills as you will get use to how words are spelled and sentences constructed. This is very important for students as well.

5.       Stronger Analytical Thinking and Skills: Stories in books are logically presented and linked, and some books are about mysteries, which the reader will have to solve by him/her self, this trains you to develop analytical thinking, which you can apply in real world.

6.       Focus and Attention: reading makes one concentrate, and this concentration eventually becomes one's natural habits. Concentration is extremely needed in every aspect of life, without it there will not be understanding and progress. Multi-tasking add more to stress, but when you concentrate all your attentions to a single thing (the book you read), you become attentive and tranquil. If you develop this tranquility over time, your behavior will change as you will become more calm and attentive, and you will begin to discover world more than you can imagine.

7.       New Skills and Inspiration: When you read books, you will read stories of successful people and how people apply different skills to achieve their objectives, and you will become inspired by them, and you will then try to emulate and apply their skills and traits in your real life.

8.       Speed in Reading: Those that developed the culture of reading tend to be fast in reading, there are people who can read an average sized book in eight hours. Assuming these are students in Universities, it means they can read the entire text books in just a day or two. They read and understand faster, and they become more intelligent and knowledgeable than their colleagues. That is why you see the intelligent students always read.

All the developed countries in the world fall within the 30 top ranked countries in terms of reading culture, and this explains why they are developed. Most of poor countries do not have culture of reading.

There is need to identify the interest of the audience so as to give them the right book. Frank Serafini once said that “There is no such thing as a child who hates to read; there are only children who have not found the right book”.  So, we need to encourage our young writers to write about things that connect and relevant to the immediate lives of our people.

This why I commend the author of the Tears of Agony (Comr Lukman Kankia) for writing about the insurgency in the North-Eastern part of this country, narrating the horror and agony the victims of the insurgency undergo. The book also explained how and why the insurgency occur, and it is important as it tells stories of those who could not tell their stories. It will also help in giving another look at the causes and likely solutions to the insurgency.

We need to have our own authors, we should not subject our readers to what other people of different cultures write. We need to write to document our cultures, norms and values, and this is necessary to tackle indiscipline and insurgency. If we don’t write, then we will then have to read about the cultures of others.

Finally, there are some solutions I proposed that will help revive the culture of reading and writing in our society; Some young people have the passion for reading but they cannot afford to buy the books, so there should be provision of free books. This could be provided by government, organisations or private individuals. I use to buy books and share among young people and then rotate the books around, but unfortunately no body finished reading any of those books yet.

Competition can be set up for both readers and writers with attractive prizes, this will encourage engagement of young people in literature. Similarly, there should be annual literary award dinner to recognize young writers and readers. There should be provision of grants to young authors, because, some young authors lack the resources to type and print their work, and as a result, they subject themselves to asking for assistance. Now with this literary grant, young authors do not have to suffer, and new authors will be inspired.  We should also encourage establishment of literary clubs and reading centers to provide training opportunity and conducive atmosphere for readers and writers respectively.

Thank you

Dr. Ahmed Adamu

Petroleum Economist and Development Expert 

Pioneer Global Chairperson of Commonwealth Youth Council

University Lecturer (Economics) at Umaru Musa Yar'adua University, Katsina

Dr. Ahmed Adamu with the Speaker, Katsina State House of Assembly,
Rt. Hon. Aliyu Muduru

Dr. Ahmed Adamu with the Speaker, Katsina State House of Assembly, 
Rt. Hon. Aliyu Muduru

Cross section of other members on the high table

Re: Nigeria-China Currency Deal

President Buhari in handshake with the President

of China, Xi Jinping

By Dr. Ahmed Adamu

The Nigeria-China currency deal is a welcome development but only in the short term. With the new currency deal, both countries will hold each other’s currency in their foreign exchange reserves, which makes it easy for their citizens to directly access both country’s currencies without the need for intermediary currency, largely Dollar. This will mean loss of demand for Dollar. Demand for Dollar will now come for direct importation from the USA. This will crush the dollar compare to Naira in the money market.

However, the Chinese Currency-Yuan, will now be exposed to direct demand from Nigerians, and this means the heavy importation from China will further increase the demand for Yuan. This will make China to hold more of Naira in its reserves, and Nigeria hold less of Yuan in its reserves due to the resultant stimulation of latent demand for the Yuan.

A single Yuan is now exchanged for N30, and with easy purchase of Yuan and continues importation from China, the demand for Yuan will increase, and its value will appreciate. And this will continue, everything being equal.

We will then see a fall in demand of Dollar for Yuan, which will further depreciate Dollar compare to Yuan, and with continues American importations from China, the Dollar may further lose its competitiveness. This will extend to further restore the value of Naira to Dollar.

However, with Yuan being cheap to get and easy to import from China, the Chinese tend to benefit more, as this will serve as incentives for Nigerians to import more from China, ceteris paribus. This will then lead to increased supply of the Naira for Yuan, and which will lead to appreciation of Yuan over Naira. And if this trend continues, Yuan will no longer be any different from Dollar in near future without structural change. The Dollar used to be exchanged for N30 seventeen years ago, and now it is around N200. This is due to continues importation from America especially of Petroleum Products and Cars and other consumables, and for it being intermediary for importations from China. The Nigeria’s largest import origin is China, which worth $11.6 billion as at last year, which is 44% higher than imports from America. Because the demand for Yuan was largely shielded by the Dollar intermediary, the demand for Yuan will be visible and direct, making it possible to appreciate more compare to Naira.

This currency deal is very good as a short term measure, but if no structural change, we will see Yuan appreciating higher and likely reaching N200 in few years. The Chinese people may not need much from Nigeria currently, so even if China hold much of Naira in its foreign reserves, it might not see the demand for it. So efforts has to be in place to stimulate Chinese demand for Naira. Therefore, to consolidate this development, there must be radical measures to stimulate economic independence, by diversifying the economy and improving the industrial, manufacturing and agricultural sector. This will offset any balance of payment deficit and enhance the exports from Nigeria, so that Nigeria will hold more of the China’s currency in its reserve. So, there should be more productions in Nigeria and reduction of importation. Nigeria can have a statistics of major importing goods and services and then invest heavily to enable production of these goods and services within the country.

Petroleum refining is the sector that requires serious and immediate investment, because, over the years refined petroleum contributed so much to the pressure on Naira. In last year, it contributed the largest proportion of the imports to Nigeria (17.9%). If we can stop importing refined products (which we must), then our economy will be much stronger, as the demand for our crude oil is still inelastic.

With the Chinese offer to give $11.1 billion loan to Nigeria, this will weaken the Nigerian competitiveness, as Nigeria will have to use the Yuan in its reserve to pay for the loan and the interest, making the supply of currency from Nigeria higher. The loan shall then be strictly invested to the manufacturing and industrial sectors that have stronger multiplier effects so as to offset the deficit.

Even if the Chinese decided to invest in oil refining and mining, their investment will be in Yuan, and they will be paid in Yuan, which will further deplete the Nigerians Foreign Exchange Reserves. The Chinese cannot invest in currency they have no control and confidence on. So, it is a ticklish situation. Despite our relatively small financial capacity to invest in the manufacturing sectors, we have to optimised and encourage local investments.

One good move, is that of additional $15 million injection on the Nigerian Agricultural Sector by the Chinese government, which if managed well, will invigorate the exports sector and reduce the trade deficit. This is a big support from Chinese government in addition to its willingness to offer more Nigerians scholarship positions and technical training slots. So, I will say this is one of the most impactful trip by Mr President.

You can listen or download my interview on this matter with Voice of America Hausa via the link below. The interview starts from 16th minutes, from the Afternoon programme for today.

http://www.voahausa.com/archive/shirin-rana/latest/2862/3144.html

For more on my previous and future write-ups, you can visit my blog: http://ahmedadamu.blogspot.com.ng/

Dr. Ahmed Adamu

Petroleum Economist and Development Expert

Pioneer Global Chairperson of Commonwealth Youth Council

University Lecturer (Economics), Umaru Musa Yar'adua University, Katsina.