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Economy & Politics

Border closure affecting revenue and Nigeria is not food sufficient  –  So Fresh co-founder, Olagoke Balogun 

The border closure by President Muhammadu Buhari is gradually affecting small and medium businesses in Nigeria.

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How So Fresh founder dumped oil money to sell fruits and salads 

The border closure by Federal Government is gradually affecting small and medium businesses in Nigeria. The latest to speak out against the closure is the co-founder of So Fresh, Olagoke Balogun, who said the closure had resulted in loss of revenue for the company due to unavailability of critical raw materials. 

Balogun said the border closure was beginning to have a ripple effect on other sectors or markets that have nothing to do with rice importation or banned items. The borders were shut to tackle rice smuggling into the country. 

Although So Fresh sources for some raw materials within Nigeria, the country is unable to provide all the raw materials needed to produce the menu or orders So Fresh caters to every day. So Fresh offers its customers Salads, Parfait, Juice and Smoothies through its nine outlets within Lagos and Abuja. 

This is one of the reasons the company depends on raw materials imported from Cotonou, Benin, where it sources for specific kinds of pineapples and green apples. But since the closure of the border, business hasn’t been the same, as suppliers continue to call to report unavailability of these fruits. 

[READ MORE: How So Fresh founder dumped oil money to sell fruits and salads]

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Not a wise decision

Speaking to Nairametrics during an interview, Balogun said the decision to close the border wasn’t properly thought-through by the administration of President Buhari.

“It is affecting. There was no pineapple in the market. There’s a specific kind of pineapple we use that comes from cotonou. We got a phone call from some of our suppliers that there’s no pineapple available.” 

He added that some weeks ago, “there was scarcity of green apple. It also comes in through the cotonou border. It’s a big challenge for businesses like ours because some of those produce come in from cotonou. 

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“It (border closure) has implications. Sometimes it looks as if policies or action from government are not well thought-out. Your focus was on rice but there are so many things that come in through those borders and it has to be a holistic view of what impact it will have on every sector.” 

Border closure to affect pricing

He said to offset this cost burden, prices would be affected. “It definitely will. We use coconut for some of our products, and one of our suppliers called us last week (three weeks ago) that they had not been able to bring in coconut.” 

It’s a lose/lose situation

Balogun said the negative impact of the border closure on businesses would affect both the businesses and the government’s revenues.

“So it results to two things. We are not able to sell those products, that’s lost revenue for the company and lost revenue for the economy as well. And we might need to look for other sources which becomes expensive. 

“And so, sometimes, some of these policies that are not well-thought-out holistically end up even increasing the cost of food and other costs of goods and services within the economy.” 

Nigeria is not food sufficient

During the interview, Balogun said with his experience in his foods market, Nigeria is not sufficient, stating that the claim was only propaganda. He explained by using his business as an example.

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“Of course, we are not food sufficient, it’s all propaganda. We don’t produce enough. Let me focus on my own raw material. 

“We don’t produce enough coconut, pineapples, and we still import watermelons. How can we be food sufficient when we import a lot of chicken? It (price) would definitely go up because we import a lot of them. We don’t produce enough. 

“And sometimes when you even produce enough, to move them from the farm to the urban centres where consumption is highest is also a challenge.” 

[READ ALSO: Banks, Fintechs, Telcos, others may lose 2% annual revenue to data breach – NITDA]

Economy dampening business growth

According to Balogun, even though So Fresh has continued to grow since its establishment in 2010, the company’s growth has slowed down in recent years because of the economic situation. 

He said the economy was dragging the growth of the business, increasing the cost of production and affecting the purchasing power of its customers.

“The most obvious one is the rising cost. If you look at the cost profile for the business over the last nine years, it has been on a steady increase. 

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“In fact, within the last two to three years, we’ve had almost doubled some of the cost of raw materials of things we use. So it might interest you to know that the particular kind of cup that we use is not produced in Nigeria, so we have to import those. 

“And when we had the forex crisis, the price of almost everything doubled. We are almost reliant on diesel because outlets have to be powered. There’s also less spending power. When prices continue to increase, people will prioritise their need, so it will affect the purchasing power of the populace. So that’s also a concern. 

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“So you find out that revenue that was growing 100% slows down. Yes it’s still growing, but there’s a slow down in the rate of growth,” Balogun disclosed to Nairametrics. 

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Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

4 Comments

4 Comments

  1. Femi Amore

    October 10, 2019 at 9:20 am

    It’s a sad situation that is happening to so fresh business. Their business has grown amid the economic woes of the country. I would suggest though for them to make adjustments and try sourcing in house and if possible adjusting their offerings to the available agricultural produce within the country. It’s appalling that in a country with the kind of space agricultural terrain we have we have been lazy with our agriculture exports, that we buy pineapples and coconuts from Benin Republic. Me Balogun and his team are very smart people and I believe they can make the needed adjustments to move their business ahead.

  2. Yahaya Abubakar

    October 10, 2019 at 11:37 am

    Must we consume what we don’t have? if that particular pineapple is not available why don’t we try our local pineapple or different fruit. For this country to develop we have to be patriotic in what ever we do. Check out history of Chinese and Indian economic successes.

    • Anonymous

      October 11, 2019 at 5:53 am

      Thank you. It’s not an excuse for all I know. If contonou imports it, why can’t we grow it

  3. Anonymous

    October 11, 2019 at 8:26 pm

    Must we consume cotonou pineapple and coconut? Green apples are offloaded from 40ft containers almost every day at Arena market Oshodi. Can you not look for pineapple suppliers from Edo state and coconut suppliers from badagry?

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Economy & Politics

FAAC disburses N696.2 billion in July 2020, as Lagos State parts with N1.46 billion  

The sum of N696.18 billion to the Federal, State, and Local governments in July 2020 from the FAAC account.

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States lose N35.51 billion to bail-out , FAAC disburses N650.8 billion as South-South states receive highest share

The Federation Account Allocation Committee (FAAC), disbursed the sum of N696.18 billion to the Federal, State, and Local governments in July 2020, from the revenue generated in the month of June 2020. This was stated in the latest FAAC report, released by the National Bureau of Statistics (NBS). 

According to the report, the monthly disbursement increased by 27.2% compared to N547.3 billion shared in June, and 14.8% increase compared to N606.2 billion disbursed in May 2020. 

READ: Nigeria total public debt hits N31 trillion as debt service gulp over N1.2 trillion in H1 2020 

Checks by Nairametrics research, shows that a total of N4.58 trillion has been shared to the three tiers of government, between January and July 2020. Highest disbursement was recorded in April (N780.9 billion), followed by N716.3 billion in January 2020. 

Meanwhile, Lagos State – the economic hub of Nigeria, parted with N1.46 billion as external debt deductions in the month, indicating a total of N9.74 billion deductions between January and July 2020. 

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Explore the Nairametrics Research Website for Economic and Financial Data

Breakdown 

  • The amount disbursed in July comprised of N474.53 billion from the Statutory Account, N128.83 billion from Valued Added Tax (VAT), N42.83 billion from Exchange Gain Differences, and Distribution of N50 billion from Non-Oil Revenue for the Month. 
  • Federal Government received a total of N266.13 billion from the total disbursement. States received a total of N185.77 billion, and Local Governments received N138.97 billion. 
  • The sum of N28.50 billion was shared among the oil producing states as 13% derivation fund. 
  • Revenue generating agencies such as Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS)and Department of Petroleum Resources (DPR) received N6.32 billion, N15.05 billion, and N2.68 billion respectively as cost of revenue collections. 

READ: Nigeria considers request for debt relief as debt stock climbs

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South-South scoops highest share 

The South-South region, also known as the Niger Delta region, received the highest share of the disbursement in the month of July. The region received a sum of N49.44 billion, representing 25.4% of the total net allocation for states. 

This is largely because the region contributes mostly to crude oil production in Nigeria, which is a significant source of revenue for the federation. Out of the six states in the region, only Cross River State is not an oil producing state. Hence, Rivers, Edo, Akwa Ibom, Bayelsa, and Delta States received a total of N24.28 billion as part of 13% oil derivation fund.  

North-West region received N36.83 billion (18.9%); followed by North-Central region, which received a net total of N30.69 billion (15.8%). Others include South-West (N29.55 billion), North-East (N26.32 billion), and South-East (N21.97 billion). 

READ: Fidelity Bank to raise N50 billion in bonds in Q4 to refinance existing debts

External debt deductions 

A total of N4.47 billion was deducted from the state’s allocation, as external debt deductions for the month of July. Lagos State parted with the highest amount of N1.46 billion, representing 32.6% of the total debt deductions in the month. A sum of N9.74 billion has been deducted as a result of external debt obligations between January and July 2020. 

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READ: Investors flee Nigerian Stocks as FDI and FPI dips

It is worth noting that, the State’s external debt has declined by 9.67%, from $1.39 billion recorded as at the end of December 2019 to $1.26 billion in June 2020. 

Others on the list of top 5 deductions are, Kaduna (N414.6 million), Oyo (N305.4 million), Rivers (N280.3 million), and Cross River (N222 million). On the flip side, Ogun State parted with the lowest, as N9.1 million was deducted, followed by Borno (N21.6 million), and Taraba (N24.5 million). 

READ: Nigeria’s manufacturing sector contracts for 5th consecutive month – CBN 

Upshot 

  • With dwindling federally collected revenue, caused by volatility in global crude oil price and economic downtrend caused by COVID-19 pandemic, it is evident that federal allocations will likely face drastic decline, which is a cue for the State governments to strategize on more creative ways of generating revenue internally.  
  • A quick check at the states’ IGR numbers, shows that 91.9% of the states in Nigeria with the exception of Abuja, Ogun, and Lagos States rely more on federal allocation, as against internally generated revenue. 
  • This implies that several states in Nigeria are technically bankrupt without debt financing, and Federal Government monthly allocation. 

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Economy & Politics

Buhari to finally send Petroleum Industry Bill to National Assembly next week

Sources in the Presidency have disclosed that the President may be presenting the bill to the National Assembly.

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Four dangerous circumstances forces FG to close Enugu Airport until further notice, aviation sector. FG’s conditional cash transfer progarmme gets more beneficiaries despite criticism

President Muhammadu Buhari is expected to present the long-awaited Petroleum Industry Bill (PIB) to the Senate as early as next week.

According to Reuters, who were quoting 4 sources familiar with the development, the presentation of the bill to the National Assembly, follows its official approval by the president late last week. This is as the National Assembly has already formed teams of members that will work most closely on the individual portions of the bill.

Both chambers of the National Assembly must have to pass the bill after deliberating on it before it can then be passed on to the president for his final signature.

The PIB which is an oil reform bill has been in the works for about 20 years, is key to the repositioning of Nigeria’s Oil and Gas Industry under its post-COVID-19 agenda as the main laws governing oil and gas exploration have not been fully updated since the 1960s due to some contentious issues like taxes, payments to local communities, terms and revenue sharing within Nigeria.

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), had disclosed that the delay and non-passage of the bill has made international investors to start losing confidence in the country’s oil and gas industry.

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While revealing last month that the PIB will be presented to the National Assembly in the next few weeks, the Minister of State for Petroleum Resources, Timipre Sylva, also said that the executive arm will be requesting the lawmakers to specially reconvene to receive and start deliberations on the bill.

These oil reforms and regulatory certainty became more pressing this year as low oil prices and a shift towards renewable energy made competition for investment from oil majors tougher.

The draft copy of the bill which was prepared by the Petroleum Ministry is a product of series of consultation between the federal government, oil and gas companies and other industry stakeholders.

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Excerpts from the bill reported by Reuters include provisions that would streamline and reduce some oil and gas royalties, increase the amount of money companies pay to local communities and for environmental clean-ups alter the dispute resolution process between companies and the government.

It also included measures to push companies to develop gas discoveries and a framework for gas tariffs and delivery. Commercializing gas, particularly for use in local power generation, is a core government priority.

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Economy & Politics

FG needs to focus on business environment reforms – Sanusi

While speaking at the Kadinvest 5.0 Summit in Kaduna, the former CBN Governor gave salient suggestions to revamping the economy.

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FG needs to focus on Business environment reforms- Sanusi

Former CBN Governor, HH Muhammadu Sanusi II has said the Nigerian government needs to focus on reforms that enable a better business environment and also called for economic diversification through maximizing technology as means to generate revenue away from crude oil.

Muhammadu Sanusi II disclosed this at the Kadinvest 5.0 Summit in Kaduna on Tuesday morning. Sanusi said the Nigerian government’s role in the economy should be small, both in absolute and relative terms. Sanusi cited Nigeria’s GDP per capita and tax revenue per capita, at $2,400 and $75 respectively, while development spending is just $36 compared to Kenya at $280 tax revenue per capita, and development spending of $280, despite having 90% of Nigeria’s GDP per capita at $2,151.

“Government needs to multiply its tax revenue, the government needs to spend on business environment reforms,” he said.

(READ MORE: Can Agriculture replace Oil in Nigeria?)

Solutions for Nigeria:

He said that the diversification made colonial Nigeria an economic success, based on the trading sector and the diversity of Nigeria’s export base, including palm oil, groundnuts, cocoa, tin, hides and cotton, and others. He added that the diversity of export meant Nigeria was less vulnerable to terms of trade shocks driven by one export in particular.

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“Nigeria has suffered boom and burst periods due to oil valuations. It affects us in direct and personal ways. The government needs to understand the importance of wrong and adverse economic decisions on the human being,” he said.

READ: Emirates Airlines banned from operating in Nigeria

Sanusi cited inflation numbers, saying Nigeria ignored inflation numbers of 2%, instead of breaking down the CPI and seeing how it affects millions of people who spend on food from minimum wages and how a 2% inflation growth wipes out earnings.

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(READ MORE: Has the President erred in stopping CBN from funding food imports?)

He compared Nigeria’s growth in the past 40 years with countries similar to countries like Malaysia. He added that Malaysia’s export base has been diversified from commodities to manufactured goods in the past 30 years.

By 1979, Malaysia’s top 2 exports were Crude Rubber and Cork and Wood. By the year 2000, Malaysia’s top 2 exports were Electrical Machinery and Office machines/Automated Data Processing equipment. Malaysia’s GDP per capita grew in the same period from $41 to $4,045. Compared to Nigeria’s GDP per capita, which increased from $345- $2,655 from 1985-2015, but failed to diversify export base as Crude Oil was Nigeria’s top export for the period.

“We were growing, but we did not diversify and that explains the huge level of poverty. It also explains the vulnerability of the economy to shocks,” he said.

Sanusi added that the failure to diversify explains the relativity of Nigeria’s slow pace, compared to Nigeria’s growth for the same period.“We have not moved in all these years. This is the difference between us and Asia, they moved!”

(READ MORE: Sanusi gets another major appointment)

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On growth and structural change:

Sanusi made a case for a change of mindset with technology adaptation. He added that the wide usage of smartphones does not mean Nigeria has leapfrogged development, as we are not a producer of technology but primarily, a consumer.

He added that Nigeria is yet to leverage on the investments in the telecoms sector. “Infrastructure in Africa has become increasingly decoupled from tech training. Someone who uses a smartphone to produce a Nollywood movie is producing! We need to invest in human capital to boost technology innovation, the smartphone is a ticket to wealth… Every excuse Nigeria has to not grow, Indonesia and Malaysia had. We need to move away from a consuming attitude( with technology) to production,”

(READ MORE: Why Africans are fast using Bitcoin for payment transfers)

On Power generation for productivity:

“In a low-income environment, income elasticity is far more important than price elasticity. People would pay for electricity if they could use it to earn,” he said. “Look at electricity as an economic resource, look at how much you could make. There is a difference between not earning a thing and earning something.”

He cited how China focuses on two major metrics, which are; the number of employed and the number of those with access to electricity, citing the per capita contribution of electricity to production needed to move people away from poverty.

READ: Nami eyes N4 trillion from extractive sector to meet President Buhari’s unusual target

He encouraged skilled jobs that leverage technology, which would enable growth and also remove the pressure of Oil money on the states.

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“Youths need an environment that has been created to give them skills. We need to invest in broadband as an economic resource,” he said citing the importance of skill transfers in developing broadband infrastructure.

(READ MORE: Shell to focus on Nigeria, Gulf of Mexico and others as it seeks to cut 40% of costs)

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On patterns for structural changes:

Sanusi said East Asia has moved from agriculture to manufacturing and later services, majorly from the informal to the formal sector. However, in Nigeria, the bulk of a similar change has been in the informal sector.

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“Manufacturing GDP in Africa has fallen from 14% in 1990 to 10.1% today. Formal job creation has been modest. This is partly because of a mistaken view that Africa can simply leapfrog manufacturing to become a service-based economy. We have declining activity, while the rest of the world has increased activity”.

READ: Nigeria to lure foreign investors with attractive tax incentives 

He added that an enlightened industrial policy will translate to meaningful job creation. He concluded that Nigeria needs to link infrastructure development to economic growth. “You have to make sure your projects are linked, you don’t just build a road here, a rail line there, an airport there without knowing how there are going to translate into an economy.”

He also mentioned that Nigeria’s Public Debt has risen, and due to high inflation he cannot see how the CBN can keep expanding its balance sheet.  He urged the FG to spend more time creating the environment through reforms that will attract the investments while also fixing the balance sheet.

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