On February 27, Nigeria confirmed its first case of COVID-19 which at the time had infected just about 80, 000 people with a little below 3, 000 dead as a result. Exactly one year later today, with over 113, 000, 000 people infected and over 2, 500, 000 dead globally, the pandemic has radically transformed the way of life of the world. There has been learning across various sectors and a re-imagination of how things are done. A critical question is, has the Nigerian energy sector learned anything?
In early March, only about a week after Nigeria’s index case, the world was greeted by oil shocks resulting from the oil price war between Russia and Saudi Arabia, further aggravated by falling demands resulting from lockdowns, flight restrictions and the general apprehension about movement and the pandemic. Countries dependent on oil exports, like Nigeria, were concerned about the toll it would take on their economy.
Oil went to an all-time low, the lowest it has ever been in 18 years and many economies went into panic mode. It was not long before the Nigerian government removed petroleum subsidies at the tail end of Q1 as it was costing the country up to $2 billion a year. The end to subsidies -or what we assumed was the end, led to market-led pricing for petroleum.
Around the same time, the marginal field bid rounds were launched, with the various fees to be paid by prospective investors rising exponentially from what they were under the last bid rounds, and required to be paid up front. The country also witnessed increased divestment in oil and gas assets by major oil and gas companies. At the start of Q4, the government introduced what it called service-reflective tariffs which were about twice the initial costs previously paid by customers.
There was equally a significant peak in renewable energy projects as many were turning to it for succor due to increased petroleum prices and utility power tariffs. The Federal government also launched its solar power strategy to electrify 5 million homes with solar power. We saw a heightened commitment to gas utilization, with the Central Bank introducing the N250bn intervention facility to stimulate investment in the local gas value chain.
The Minister of Petroleum for State, Chief Timipre Sylva had also promised that gas-powered cars would begin operating in October 2020. In his words “The alternative we are now introducing is gas, which is definitely going to be cheaper than the subsidised rate of PMS”.
He went on to say that Nigerians were urged to convert their cars to dual fuel. Four months later, we are yet to see any auto gas cars ply our roads. There were also very swift moves to pass the Petroleum Industry Bill (PIB) last year, and indeed many stakeholders waited expectantly for it, but the legislature failed to deliver.
Soon, the Federal Government launched the Nigerian Gas Expansion Program at the tail end of Q4, a month after the news of the country officially entering recession broke. The aim of the Program was to increase gas development from three streams- Liquefied Natural gas (LNG,) Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG).
With initial reports of a vaccine rollout, the oil price that had crashed to lower than $30 per barrel last year began a steady and somewhat magical rise and currently has gone as high as $67, with predictions that it could rise to as much as $100, particularly with the release of more vaccines and easing of lockdown.
With things looking good for the country again, we see a return of the petroleum subsidy in the locked pricing of petrol. A return of fuel subsidy means heavily increased subsidy payments for the country and similarly an increased propensity for corruption and misuse of funds which has characterized Nigeria’s subsidy regime for long. We cannot claim to have learned much as a country if we think all is well, and we are out of the woods.
It would be counterintuitive to wait on another oil shock to begin to quickly diversify our portfolio and heavily invest in gas and renewables. Like the Biblical story of Joseph and Pharaoh, we should save during our “seven fat years” for the “seven lean years”.
This is not the time for Nigeria to sit back and gloat in its rising oil fortunes, but a time to invest in improving energy access for its citizens by funding renewable energy research, aggressively supporting a solar drive, entering into public-private partnerships for gas development and providing incentives for businesses working in the energy transition space. Perhaps climate change and the decisions made around it will be the next price cruncher for oil. Whichever way, we cannot afford not to be battle-ready.
SEC and the proliferation of unregistered investment platforms
The recent move has generated diverse views from stakeholders with some critics classifying this action as irrational.
According to a circular issued by the Securities and Exchange Commission (SEC), it affirmed its knowledge of the existence of trading platforms that allow investors access to securities listed in other jurisdictions.
The capital market regulator further reiterated the provisions of sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations which state that only foreign securities listed on any exchange registered in Nigeria may be issued, sold or offered for sale or subscription through approved channels to the Nigerian public.
The announcement furthers SEC’s quest to strengthen investor protection, promote transparency in the operations of the Nigerian capital market and ensure all investment transactions are within the regulatory purview of the commission.
Recently, the capital market regulator introduced a new requirement for the inclusion of the commission’s contact details in all prospectuses or offer documents issued to the general public in a bid to ascertain the genuineness of such securities. Besides, it is often found that the activities of illegal fund managers become prevalent during a financial or economic downturn, making the public susceptible to the juicy yet unsustainable returns promised by these managers.
The recent move has generated diverse views from stakeholders with some critics classifying this action as irrational. They cited the impact of investing in foreign stocks on portfolio diversification and the role of Fintechs in driving financial inclusion among others. On the other hand, supporters of this action argued for the need to reduce the pressure on external reserves especially at a time when the green-back is needed to stimulate economic recovery.
Also, that it helps to safeguard the country’s investing community. We recall that the recent policy by the CBN to close all accounts by Deposit Money Banks (DMBs) and Other Financial Institutions (OFIs) involved in dealing with cryptocurrencies received a lot of backlash from the public.
On this move, however, we opine that it is still within the legal purview of the SEC to discourage investments in foreign listed securities. Nonetheless, we are aware of the concept of globalization in commerce and thus, there might be a need for a rejig of the Investment and Securities Act 2007, and other related acts to capture current trends and developments in the investment globe.
To avoid backlash going forward, we suggest more public education for clarity with regards to future policy decisions.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
AfCFTA to promote inclusive trades for women and youth in Africa
The SMEs and Startup ecosystem in Nigeria which are dominated by women and youths should equally take advantage of these opportunities.
Inclusive economic development remains one of the core elements of both the African Union’s Agenda 2063 and the United Nations Sustainable Development Goals (SDGs). In furtherance of this, article 3(e) of the AfCFTA main Agreement and article 27(2)(d) of the Protocol on Trade in Services specifically mandate State parties to promote gender equality and “improve the export capacity of both formal and informal service suppliers, with particular attention to micro, small and medium-sized; women and youth service suppliers.”
With over 60 percent of its population being under the age of 25, Africa is regarded as the youngest continent in the world. This presents both challenges and opportunities for the continent. For instance, in Nigeria, the young population has led to attendant social risks as unemployment nears 40% creating a ticking time bomb. The popular saying is that an idle mind is the devil’s workshop.
On the positive side, however, the young population when properly harnessed will heighten productivity and provide affordable labour which in turn may lead to increase in investment. Nigerian youths just like their counterparts in other African States are known to be very innovative and enterprising. With the right policy and the enabling infrastructures, this energic population can drive the AfCFTA agenda.
Relatedly, women constitute most of the players in the SMEs ecosystem, accounting for nearly 90% of the labour force in the informal sector. A visit to the popular Balogun market in Lagos Nigeria will attest to this fact. No doubt, regional informal trades amongst women and youth within the ECOWAS region have been going on even before AfCFTA. But the new trade deal is meant to open the door to a population of 1.3 Billion people with a combined GDP of USD2.6 Trillion.
This is a huge opportunity and further buttresses the need for gender-sensitive and youth-centric implementation that will ensure sustainable and inclusive growth. As noted by a commentator, women and youth traders are less likely to be equipped with the appropriate skills, technology and resources that would enable them to benefit from trade and trade liberalization as they continue to suffer from invisibility, stigmatization, violence, harassment, poor working conditions and lack of recognition for their economic contribution.
These challenges are made worse by non-tariff barriers such as poor infrastructure, insecurity, lack of access to funds, high unemployment, weak currency, cost of capital, multiple taxations, and other regulatory hurdles. A clear example of the hurdle being the recent intervention by the agencies of the Federal Government of Nigeria in the areas of FINTECH and Cryptocurrency.
Just last week, the Securities and Exchange Commission issued a circular advising Capital Market Operators to sever ties with platforms that facilitate access to trading in securities listed in foreign markets. While recognizing the role of the regulators to protect the investing Nigerian public and their assets, however, the interventions have been interpreted by many as capable of sending a wrong signal and acting as disincentives to innovation. Again, this brings to the fore the need for Continental Free Trade that fosters inclusiveness with member States initiating policies that create more opportunities for the youth and women.
At the webinar held on 29 March 2021 to mark the signing of the MOU on strategic partnership between the AfCFTA Secretariat and the United Nations Development Programme (UNDP), the AfCFTA Secretary-General Mr Wamkele Mene re-echoed the need for inclusiveness in the AfCFTA implementation with the following words:
“We’ve learnt from other trade agreements in the world. And the lesson to draw is that if a trade agreement neglects the most vulnerable segment of the society, if a trade agreement is perceived to benefit only the multi-national corporations, only the elite, it shall not succeed and it shall not have legitimacy as far as the citizens are concerned. And so that is why I have made it my priority in the implementation of this agreement that there should be shared benefits, there should be shared responsibility with Africans across the length and breadth of the African continent in concrete areas such as affirmative action for women in trade. We are looking at concrete ways in which we can expand the benefit for young people and for women in trade. This is the type of development that we require in order to make this agreement successful. This is the type of development that we require to make sure that the benefits are inclusive.”
This Statement coming from the AfCFTA Secretariat is a clear indication of the aspiration towards gender-balanced and youth-sensitive AfCFTA. However, one is not unmindful of the limited role of the AfCFTA Secretariat in the implementation process. The actual implementation is done at the national and regional level. And this is not to underestimate the very critical albeit complementary role that the Secretariat plays in this regard.
Therefore, the change must start from each member country and percolate through the regional economic blocs and finally to the entire Africa. Nigeria through its agencies such as the Central Bank of Nigeria (assisted by the private sector) can support inclusiveness by providing AfCFTA-focused low-interest financing, training of the SMEs on cross-border trades as well as other incentives to promote the engagement of women and youth in trades on the continent.
The impact of the COVID-19 pandemic on youth and women-led businesses has widened the economic gap and further impoverished those at the lowest rung on the economic ladder – mostly women and youths. This calls for heightened capacity building in creating new trading and entrepreneurial opportunities for all. With the constant value erosion in the local currency and low-yield environment, entrepreneurs and SMEs in Nigeria can, through cross-border trades, hedge against business risks and equally take advantage of possible arbitrage that exists in different markets within the AfCFTA.
A shift from the business-as-usual approach on the issue of women and youth is needed under AfCFTA to ensure that the objectives are actualized. Although the AfCFTA is not the magic bullet or the cure for all the economic challenges facing the youths and women in Africa, it is hoped that when fully and equitably implemented, it will go a long way to address some of the factors inhibiting the economic growth of these vulnerable groups.
A recent report commissioned by the UNDP and the AfCFTA Secretariat titled “The Futures Report: Making the AfCFTA Work for Women and Youth” which was published in December 2020 has shown that beyond the projections, numbers and negotiations, the realization of the AfCFTA objectives will depend on decisive actions and collective efforts of the African people. Therefore, concrete measures and investment are needed to ensure that women and youths, who account for the majority of the population, business owners and workforce can be better integrated into the value chains, jobs and opportunities available under the AfCFTA.
As shown by the Report, many entrepreneurs and SMEs across Africa are already taking steps and positioning themselves to benefit from the free trade area and scale their businesses. Some SMEs owners interviewed noted that they are increasing their production lines and sourcing for inter-continental partnership ahead of the progressive implementation of the various phases of the trade regime.
The SMEs and Startup ecosystem in Nigeria which are dominated by women and youths should equally take advantage of these opportunities. Finally, given that trades in goods and services are fast moving into the digital space, the AfCFTA members States need to invest heavily in digital infrastructures and urgently address the high cost of data in Africa which has made it difficult for the majority of women and youths to access opportunities available online.
Nairametrics | Company Earnings
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- BUA Cement Plc announces Board Meeting
- Infinity Trust Mortgage Bank Plc records a 60% increase in profit after tax in Q1 2021.
- Tantalizers Plc reports a loss after tax of N422.05 million in FY 2020.
- NASD Plc announces admission of newly demutualized NGX shares.
- Lotus Halal Fixed Income announces dividend of N20 per unit for Q1 2021.