100 DAYS OF WASTEFUL SPENDINGS

It is not a new thing in the history of Nigeria that when electioneering is getting closer, it is either we
have new projects being approved by all tiers of government or those approved without adequate arrangement for funding will suddenly become the toast of the government. Therefore, the release of N200 billion to the Power Holding Company of Nigeria (PHCN), in the same way other sectors of the economy have been attracting special fund for various paper projects without physical implementation by the administration of President Goodluck Jonathan in the last few months, has raised fears of industry experts that the nation’s treasury may be empty before 2011 election.

With the exception of the stability in fuel supply and signing of the Nigerian Content bill into law so as to pave way for indigenous contractors in the oil and gas industry as well as progress made insssss securing the commitment of the International Oil companies (IOCs) to provide adequate gas for power generation, other sectors of the Nigerian economy shows a dismal performance during the 100 days in office of President Jonathan. The intervention in the aviation sector, through special fund made available by the Central Bank of Nigeria (CBN) for instance, has been described as inadequate even though it will protect ailing local airlines from complete collapse.

It would be recalled that four power stations and West African Gas Pipeline (WAGPP) were hurriedly inaugurated by former President Olusegun Obasanjo during the last few weeks of his administration in 2007 to justify the huge amount withdrawn from the excess crude account without the support of 36 governors led by former Governor Victor Attah of Akwa Ibom State. Will this action result in another round of inauguration during the last quarter of this year?

Investigations revealed that all the ministries have been allegedly mandated to increase budget for public relations and settlement of key stakeholders so as to ensure that the administration of President Jonathan is considered proactive, despite the decay of infrastructure and poor response of contractors handling various projects in the country.

For instance, there is no hope of completing several power projects expected to increase generation capacity of the Power Holding Company of Nigeria (PHCN) from 3,000 megawatts (MW) to 6,000mw before December 31, 2010. This is contrary to the position of President Jonathan while declaring open the 10th Nigeria Oil and Gas conference in Abuja in February when he gave the assurance that the government would take all necessary steps to deliver on its promise to provide the basic infrastructure needed for reliable electricity in the country. At the forum, he had noted that a situation where majority of Nigerians were denied the benefit of power supply, which the petroleum industry could guarantee through gas, was unacceptable.

On the state of the nation’s roads, most contracts awarded and inflated are yet to attract seriousness of contractors so that these projects will again be included in 2011 budgetary approval. One of such roads is Yenagoa-Port Harcourt express Road, Lagos-Benin expressway and Lagos-Abeokuta expressway.

Officials of the Federal Ministry of Works responsible for the supervision of these roads expressed dismay over the inauguration of Ota Bridge in Ogun State, even though Julius Berger Plc is yet to complete both ends of the bridge that will enable vehicles to climb freely and descend at high speed without hindrance.

The officials lamented that critical stakeholders were likely to compromise. They noted the case in which the National Union of Petroleum and Natural Gas Workers (NUPENG) suspended the 14-day ultimatum on the poor state of the nation’s road networks without any significant repair on these roads by the Ministry of Works.

Other areas noted for poor performance by investigation is the depletion of the nation’s external reserves from $42 billion to $38.2 billion. The nation’s foreign reserves merely got an increase of three per cent to $38.2 billion by mid-August from $37.1 billion compared to $43.3 billion during the same period last year, according to the data released by the Central Bank of Nigeria (CBN).

Power

The release of N200 billion to the PHCN was initiated to ensure that electricity workers did not embark on industrial action over the non-payment of their arrears. It is also to ensure that the Special Adviser on Power, Mr. Barth Nnaji, is given the opportunity to offer some of the subsidiaries for privatisation without the resistance of NUEE. The worker’s union had directed all its members to chase out the special adviser if seen in any of the offices of PHCN nationwide so that he would not sell PHCN subsidiaries to his friends and loyalists of the government.

Industry officials said that for a stable power supply in the country, the nation needed not less than 30,000mw compared with the 3,800mw achieved recently.

Corroborating this view, a former employee of PHCN, who served at the Osogbo station of the corporation, Mr. Emmanuel Adebayo, said now that they learnt that the PHCN had some money, it was time for agitation

Apart from this, the PHCN also has unpaid arrears of pension fund running into billions of naira.
According to Dr. Musa Ibrahim, PenCom commissioner (Inspectorate), the PHCN would soon
be dragged to the presidency for the unmerited pension fund.

If PenCom goes ahead with its threat, there is no way part of the N200 billion will not be used to settle the pension fund deficit that should have been given to the Pension Fund custodians.

According to him, the problem of uninterrupted power supply in the country goes beyond the release of a once-and-for-all money to the company, considering the fact that Nigeria needs about N750 billion annually to improve power supply in the country

A financial consultant, Dr. Kunle Adebayo, described the release of N200 billion as a drop in the ocean, disclosing that it would not change any situation, considering the amount required to fix the Nigeria’s power sector.

A new twist was, however, introduced by a political analyst and member of the Action Congress of Nigeria (ACN), Mr. Yemi Olagunju, who blamed the federal government for the problem in the sector as a result of lack of regulatory authority.

According to him, the Nigerian Electricity Regulatory Commission (nerc), because of leadership problem, had not really lived up to expectation and thus could not provide a rein on PHCN.

The former Minister of State for Power, Mr. Remi Babalola, in a recent presentation, described the decay in power sector as complex, starting from generation to transmission and distribution. Even though he blamed the non-achievement of the 6,000mw generation capacity in December 2009 on inadequate gas supply, he noted that the weak transmission facilities and distribution substations required huge investment that the government alone could not carry the burden except through the support of the private sector.

Currently, the total installed capacity of PHCN power stations is approximately, 6,200 megawatts. However, some of the power stations generate less than 45 per cent of their installed capacities. The transmission lines in Nigeria are also mainly radial, long and fragile, leading to high power losses on the network. The distribution lines are over-extended, leading to high voltage drop and losses.

The Transmission Company of Nigeria (Transyco) also announced recently that more than 30 per cent of power being generated at the power stations disappeared during transmission as a result of weak facilities.

During a training session organised by a power sector consultant, Mr. Goody Duru-Oguzie, it was revealed that the government would need to double expenditure on repairs of generating units at Egbin Thermal Station to ensure that it continues to operate unhindered.

Industry experts suggested that immediate privatisation of PHCN subsidiaries as contained in the Power Sector Reform Act of 2005 should be the direction of President Jonathan. They noted that the threat of workers will not affect the proposal if adequate arrangement is made to pay appropriate compensation. “Additional release of fund to PHCN will not improve power supply except the government muster political will and allow the private sector to control generation and distribution arms in the power sector”, they suggested.

Implementation of the new gas pricing scheme is expected to increase the number of investors in establishment of power generating stations such that their performance will act as benchmark for the existing power stations of PHCN.

Financial sector on the upbeat

In his post-inaugural speech after the death of his predecessor in office, Umaru Yar’Adua in May 2010, President Jonathan did state, emphatically, his commitment to see to a logical conclusion, the administration’s programmes.

One of such programmes is the current reforms in the banking, nay financial sector. Of course, the Lamido Sanusi-driven banking reform, which began under the watch of Yar’Adua, is yet to lose steam.

This unwavering support for the reforms saw the president extending expeditious assent to the Asset Management Corporation of Nigeria (AMCON) bill in July. President Jonathan said the legal establishment of the corporation was in keeping with his administration’s determination to ensure the stability of Nigeria’s financial sector and stimulate national economic recovery.

He added that the establishment of AMCON was a manifestation of the Federal Government’s commitment to safeguarding the interests of depositors, creditors, and others in Nigeria’s financial system.

It will be recalled that financial analysts had expressed some misgivings over the relationship between Jonathan and the CBN governor, Lamidi Sanusi Lamido, over the reforms, but Sanusi maintained that he had no problem with the president. “Dr. Jonathan, I know and I have known at every point in time, has approved the decisions that we took at Yar’Adua’s time and said that we should go ahead with the decisions. So, I have always briefed him and I have always got the impression that he has continued to support what we are doing,” he said.

The forex reserves stood at N37.2 billion in July as against $43.3 billion a year earlier. This sharp decline has been attributed to demand pressure from importers and a reduction in accruals from oil export revenues.

However, the apex bank has maintained that the present level could finance more than 17 months of import.

In his comment, a member, CBN Monetary Policy Committee (MPC), Dr. Doyin Salami, said the stability of the foreign reserves will have positive effects on the interest and exchange rates.

According to Salami, who is also a faculty member of Lagos Business School, “If foreign reserves stabilise, there may not be pressure on the naira. If not, depletion of the reserves may not be good for the economy. The biggest points will not be interest rates but exchange rate. Reserve management is going to be at the heart of stability going forward and management of exchange rate is going to be key.”

Since Jonathan assumed office, the exchange rate of the naira against other currencies of the world has been relatively stable. The three market segments, interbank, official and parallel market, have maintained stability with periodic appreciation..

Meanwhile, Nigeria is set to create a sovereign wealth fund. This will replace the excess crude account. Already, the government has set aside $1 billion. But it is unclear where the $1 billion would be held in the interim.

Only last month, the National Assembly approved N445 billion in extra spending on top of the main N4.4 trillion 2010 budget. This is likely to push Nigeria’s fiscal deficit beyond 5.4 per cent of GDP above a three per cent target set three years ago.

Of note too is the N500 billion infrastructure fund set aside by the apex bank for the reactivation of critical sectors which include power, aviation and manufacturing. Already, disbursement of the funds had commenced.

In a nutshell, the financial sector is still in the upbeat under the present dispensation.

Capital Market

The coming of President Jonathan to the seat of power after the demise of President Yar’Adua earlier in the year, rather than add value to the growth and development of the capital market in the last 100 days, has turned out to be on the negative and this still beats experts’ permutations.

It will be recalled that based on the about 24.5 per cent recovery of the equities market in the first quarter of the year, investment advisers and dealing members on the Nigeria Stock Exchange had gone to town, to practically ring the bell, beckoning on investors to return to the stock market.

An x-ray of transaction from the beginning of the year to the close of the second quarter, as of June 23, showed that the percentage increase in the market in the first quarter of the year has been eroded by1.9 per cent.

Since the close of the first quarter, investment transactions in the securities market have, rather than take the upward climb, become a sliding one and occasionally if it bounces back, it will suffer great dip the next day.

Mixed reactions in aviation

Mixed reactions have started greeting how the nation’s aviation sector has fared under him by experts.

For Olumide Ohunayo, a former president of National Cabin Crew Association (NACCA), Jonathan’s 100 days in office have witnessed the fast-tracking of world assisted projects of Western and United States affiliated. Within the period, some old projects were completed. Top on the achievements recorded within the period, according to Ohunayo, is the release of N200 billion bail-out to some sectors, including the aviation industry.

Under Jonathan, each of the domestic carriers was given access to a N1 billion loan to be monitored by the Central Bank of Nigeria (CBN).

Also worthy of mention was the stoppage of what Ohunayo called the “stench” of Abuja runway project by the National Assembly.

For the secretary of the National Union of Air Transport Employees (NUATE), Comrade Gideon Ogbuji, the 100 days of Jonathan have brought peace and stability to the sector in the areas of flight operations.

While expressing hope that peace would continue in the industry, he pledged its support for the decision to purchase three presidential jets at a whopping N23 billions ($153 million), saying Nigeria was not so poor that his president would be flying about in an unsafe aircraft.

According to him, it is a national embarrassment that the aircraft the president travelled in to Uganda recently developed technical fault.

He, however, urged Jonathan to focus more attention on the state of security within the industry and better supply of electricity to the airports for safety of flights.

Many aviation workers, who spoke under anonymity, however, condemned the insensitivity of the president to the controversial concessions entered into with the aviation agencies, especially the Federal Airports Authority of Nigeria (FAAN) which, they said, had worsened the situation of the agencies.

Maritime

For the maritime sector, the only remarkable thing the president did was to inaugurate the upgraded phase of the Onne Ports Complex, in Rivers State. And for this, hardly could any reasonable person give him the credit for it since he did not, in any way, directly or indirectly impact on the port complex.

It was the administration of the late President Yar Adua which sweated, nurtured and brought it into fruition, but which his death could not allow him to inaugurate.

So, what has the maritime sector gained from President Jonathan’s 100 days in office?

Railway has continued to crawl; the Nigerian Maritime Administration and Safety Agency (NIMASA ) has continued to flounder, and the wrecks have continued to threaten navigation in the channels, while those who are saddled with the responsibility of ensuring that things work, especially the Minister of Transport, Yusuf Suleiman, have continued to concentrate on the problems of the freight forwarders at the expense of other more vital and pressing national issues.

The fact that port congestion is currently looming is not being considered, just as the inertia incapacitating the country from enabling the Nigeria Railway Corporation (NRC) serve the interest of importers to evacuate cargo from the ports by rails has remained a mirage.

Where is the Nigerian Inland Waterways Authority (NIWA) and the dreamed project on lower River Niger dredging? It was where the late President Yar’ Adua left it. President Jonathan is yet to positively impact on the transport sector, outside the issues of rhetoric.

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