BusinessDay 25 Oct 2017

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Wednesday 25 October 2017 08 BUSINESS DAY C002D5556 WEST AFRICA ENERGY In association with talking points Nigerians call for more action on LPG commitment ISAAC ANYAOGU Four months after Maikanti Baru, group managing director of the Nigerian National Petroleum Corporation (NNPC) said the corporation was interested in working with Indonesia on its initiative to replace firewood and kerosene with Liquefied Petroleum Gas (LPG), as primary domestic fuel for cooking, Nigerians are calling for action. Through social media feeds monitored last week, many Nigerians took to their Twitter pages calling for an upgrade to gas, indicating a greater awareness for the role of natural gas in protecting the environment and saving costs for millions of households who depend on wood and kerosene for domestic cooking. Using the hashtag #upgradetogas, many Twitter users were asking about LPG gas plants and availability of gas cylinders refill locations. Africare, an independent, private-sector charity is promoting the advocacy call through social media. BusinessDay asked Ndu Ughamadu, NNPC’s spokesman for update on the planned arrangement with Indonesia but did not get a response. However, the corporation’s July monthly operations and financial report, indicates that out of the 1,115.41 mmscfd of gas supplied to the domestic market in July, about 688.70 mmscfd, representing 61.74 percent was used for gas-fired power plants while the balance of 426.71 mmscfd or 38.26 percent was supplied to other industries, including for LPG. Like Nigeria, Indonesians once used kerosene as the main fuel for households. To change this situation, the government launched a kerosene substitution programme in 2007 to convert over 58 million users of kerosene to LPG. Like Nigeria also, Indonesia had subsidized kerosene for decades but as population continues to rise and oil prices surged higher, the subsidy became a huge burden for the country, accounting for 57 percent of the state’s total petroleum product subsidy According to a study on Kerosene to LPG Conversion Programme in Indonesia jointly written by PT Pertamina & the WLP- GA, France, between 2001 and 2008, all citizens meeting the program requirements received free “Initial Package”, consisting of a 3 kg LP Gas cylinder, a first gas-fill, and a one-burner stove, hose, and regulator. A major effort was undertaken to plan an infrastructure that could be built within the first three years. Based on end-use “energy equivalent” calculations, one litre of kerosene equates to 0.39kg LP Gas, Indonesia saved $2.17 billion by 2006. The researchers said Indonesia’s model succeeded due to careful planning. The country set a five year plan in motion and faithfully followed the timelines and met delivery milestones. Key organisations were given specific roles. The Ministry of Energy and Mineral Resources (MEMR), coordinated programme implementation; Pertamina (the national oil company), procured gas cylinders and supplied LPG; the ministry of Industry procured gas stoves, hoses, and regulators; the ministry of Women’s Empowerment embarked on messaging, while the ministry of Small and Medium Enterprises distributed LP Gas packages. In less than 6 years, Pertamina has distributed initial packages to almost 54 million households and small-medium enterprises (93 percent of their target), cut kerosene imports by 8.2m litres and replaced it with 3.2 million metric tonnes of LPG, saving the country $6.9 billion. In 2016, Ghana embarked on a Rural Liquefied Petroleum Gas (LPG) programme to scale up the distribution of 60,000 free cylinders, cook stoves and related accessories to beneficiaries in low access areas. The goal was to incentivize private LPG marketing companies to set up there. Nigeria’s LPG market has witnessed massive growth from less than 70,000 metric tonnes consumed in 2007 to about 500,000MT currently. “There is a strong economic, environmental and security case for use of gas in Nigeria, including even for Compressed Natural Gas (CNG) cars” said Chijioke Mama, energy analyst and founder of EnergyDatar, an energy intelligence firm, in a recent comment for BusinessDay. Operators say big policy initiatives that will encourage investments in manufacturing plants, storage facilities and jetties, and the promotion of gas-powered vehicles are required in Nigeria.
BUSINESS DAY Why it Matters NEWS YOU CAN TRUST I WEDNESDAY 25 OCTOBER 2017 Why government should boost tax revenue as Nigeria’s debt deteriorates? Nigerian government is under pressure to boost non-oil revenue as it continues to use the large chunk of generated oil revenue to service debt, raising concerns about the deteriorating debt position. Some experts are of the view that government has exceeded its borrowing limit while its N7.4 trillion budget is a drop of water in an ocean given a copious infrastructure deficit undermining economic growth. Between January and June, over 90 percent of government revenues were channelled toward debt serving, according to available data from the National Bureau of Statistics (NBS). The country’s interest payments-to-revenue ratio doubled last year to 66 percent of revenue, according to the International Monetary Fund IMF. According to a September 19 report by the NBS, Nigeria’s overall foreign debt, stood at $15.1 billion as of June 30, while domestic debt was N14.1 trillion. The recently-issued N100 billion sovereign Sukuk bond by government and plans to further issue another $5.20 billion of Europe bond in the next three months to fund capital expenditure potentially adds to debtservicing cost. While the good news is that the country is in an advantageous position to borrow from the international market because of recent improved fundamentals, another round of militant attack on oil facilities and sudden drop in the price of oil could deal a great blow on revenue. This means government has to boost tax revenue in order to fund capital projects. A robust tax base will help diversify the economy away from over reliance on oil. Finance Minister Kemi Adeosun recently bemoaned the country’s very low tax to GDP ratio of 19 percent, which is one of the lowest in the world. However the government plan to improve tax revenue through voluntary compliance while increasing the number of people in the tax net is a right step in the right direction. The chairman Federal Inland Revenue Services (FIRS) Babatunde Fowler, also said that the government is putting in place plans to track tax defaulters using phone bill records and Bank Verification Numbers (BVN). “Individuals, who spend above a certain threshold on their phone bills, would be examined to ascertain their tax bills. The same method would also apply to individuals with BVN,” Fowler stated. Already, the Federal Inland Revenue Service, through tax collection, generated the sum of N2.11 trillion as revenue from January to July this (MGI) in 2014, an estimated $1.5 trillion needs to be invested in infrastructure through 2030 to allow Nigeria’s economy reach its full potential, with much of the investments going to power, transportation, and real estate. This would mean annual infrastructure investments in excess of $50 billion. “At around 25% to 40% of GDP, Nigeria’s stock of infrastructure is significantly lower than the global average of about 70%,” said analysts at (MGI). Stakeholders opined that a robust and transparent concession policy through an organized Public Private Partnership could help bridge infra- At around 25% to 40% of GDP, Nigeria’s stock of infrastructure is significantly lower than the global average of about 70% year. It is imperative for the Nigerian government to boost non-oil revenue because it doesn’t have the resources to fund huge capital projects across the country. The Head of Energy Research, Ecobank Plc, Dolapo Oni, said that Nigeria would require a minimum of $30bn (about N9.47tn) annual investments to bridge the infrastructure gap that exists in the economy. According to the Mc- Kinsey Global Institute structure deficit. The most common type of privatization scheme has been the concession or franchise where a private operator provides rail transport services using publicly owned infrastructure. As at 2005, Nigerian ports faced a myriad of challenges that made it one of the most inefficient ports globally as it was fraught with insecurity, theft, and congestion. However, In 2006, the Federal Government concessioned the 26 ports in Nigeria to 25 Terminal Operators over 25 years license period in a land lord system that reduced financial liabilities on the part of government. According to a report by global accounting firm, Deloitte, “as a result of copious investment by Terminal Operators (N200 billion), the ports witnessed increased ship traffic and throughput which led to a 400 percent rise in container throughput from 400,000 TEU in 2006 to 1.60 million TEUs in 2014,” The concession of the ports has resulted in job creation along the value chain such as freight forwarding and insurance while saving the Nigerian economy an estimated $800 million annually in congested fees alone. Recently, the Federal Executive Council (FEC) Okayed the planned concession of Lagos and Abuja Airports as it believes the privatization of these assets will result in better management. Nigerian Airports are rated as one of the worst in Africa, as an insalubrious environment coupled with extortion from immigration and custom officers of passengers and lack of space validates the negative ratings. Adeosun has allays the fears of some Nigerians that government is not heaping debt on the next generation. She said its a usual thing for government to borrow when expenditure exceeds revenue. However, the country’s debt was paid through a debt payback by former minister for Finance Ngozi Okonjo Iweala, as Nigeria exist the Paris club group of creditors. fivethings about innovation C002D5556 Nigeria Plans to Sell $5.5 Billion of Eurobonds by Year-End Nigeria plans to sell as much as $5.5 billion of Eurobonds in the next three months to fund capital projects and replace local-currency debt in order to fund capital budget. N330 billion The Debt Management office (DMO) released its bond issuance calendar for the fourth quarter of 2017 which points to lighter borrowing pattern with FG intending to borrow all-out N330 billion, split across the 5-year (2021) and the 10-year (2027) at N165 billion apiece. The calendar also saw the removal of the 20-year bond (April 2037). 7.1 percent According to a 2014 report McKinsey Global Institute (MGI), for Nigeria to achieve its full economic potential by 2030, GDP growth needs to average a minimum of 7.1% annually. This would see GDP grow to an estimated $1.6 trillion, with the potential for an estimated 70 million people to move out of poverty. $30 billion Nigeria would require a minimum of $30bn (about N9.47tn) annual investments to bridge the infrastructure gap that exists in the economy. N200 billion According to a report by global accounting firm, Deloitte, “as a result of copious investment by Terminal Operators (N200 billion), the ports witnessed increased ship traffic and throughput which led to a 400 percent rise in container throughput from 400,000 TEU in 2006 to 1.60 million TEUs in 2014,” The concession of the ports has resulted in job creation along the value chain such as freight forwarding and insurance while saving the Nigerian economy an estimated $800 million annually in congested fees alone. Published by BusinessDAY Media Ltd., The Brook, 6 Point Road, GRA, Apapa, Lagos. Ghana Office: Business Day Ghana Ltd; ABC Junction, near Guinness Ghana Limited, Achimota – Accra, Ghana. Tel: +233243226596: email: mail@businessdayonline.com Advert Hotline: 08116759801, 08082496194. Subscriptions 01-2950687, 07045792677. Newsroom: 08022238495 Editor: Anthony Osae-Brown. All correspondence to BusinessDAY Media Ltd., Box 1002, Festac Lagos. ISSN 1595 - 8590.
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