Category Archives: Business

Business

Shell contributes over $1bn in taxes to Nigerian Govt

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Estimated reading time: 3 minutes

Anglo-Dutch oil giant Shell has announced that it paid over $1 billion in corporate taxes and royalties to the Nigerian government in 2023. This figure, revealed in their recently published 2023 Shell Briefing Notes, represents a significant contribution to the national coffers.

The breakdown shows the Shell Petroleum Development Company of Nigeria Limited (SPDC) contributing $442 million, while Shell Nigeria Exploration and Production Company (SNEPCo) remitted $649 million. This combined total reflects a decrease from the $1.36 billion paid in 2022.

A statement by the company’s Media Relations Manager, Abimbola Essien-Nelson, said similar payments made by the two companies in 2022 amounted to $1.36bn.

“These payments are Shell exclusive and do not include those made by our partners,” said SPDC Managing Director and Country Chair, Shell Companies in Nigeria, Osagie Okunbor.

Okunbor explained, “Shell companies in Nigeria will continue to contribute to the country’s economic growth through the revenue we generate and the employment opportunities we create by supporting the development of local businesses”.

Reasons for the Decline

While the official reasons behind the decrease are not explicitly stated, it’s possible that factors like global oil prices, production volumes, or operational costs in Nigeria might have played a role.

Impact on Nigeria

Despite the decline, Shell’s tax contribution remains a substantial source of revenue for the Nigerian government. These funds are crucial for financing public services, infrastructure development, and social programs. The Federal Government is currently seeking a $750 million loan from the World Bank, and healthy revenue streams from oil majors like Shell are vital for demonstrating fiscal responsibility.

Transparency and Accountability

The announcement by Shell comes amidst ongoing discussions about transparency and accountability in the Nigerian oil sector. Civil society organizations have long advocated for a fairer share of oil revenue for local communities and a more robust regulatory framework.

Looking Ahead

The future level of Shell’s tax contributions will likely depend on several factors, including global oil market conditions, Nigerian government policies, and the company’s own operational performance. This announcement highlights the significant financial contribution of oil majors to the Nigerian economy, but also underscores the need for continued discussions on transparency and responsible resource management.

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CBN loosens reins on oil exporters, allows use of held FX for local spending

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Estimated reading time: 2 minutes

In a move seen as a potential compromise, the Central Bank of Nigeria (CBN) has relaxed its February 2024 directive restricting the repatriation of foreign exchange (FX) proceeds by international oil companies (IOCs).

Previously, the CBN mandated that IOCs could only repatriate 50% of their export earnings immediately, with the remaining 50% held for 90 days. This policy aimed to boost domestic FX liquidity. However, a new CBN circular dated May 6th, 2024, clarifies that IOCs can utilize the held 50% for settling certain financial obligations within Nigeria.

“The initial 50 percent of the repatriated export proceeds can be pooled immediately or as at when required,” the circular states, signed by CBN’s Director of Trade and Exchange Department, Hassan Mahmud. “[The funds] can be used to settle financial obligations such as petroleum profit tax, royalty and domestic contractor invoices.”

This relaxation offers IOCs more flexibility in managing their finances. Analysts believe it could ease tensions that arose after the initial restriction was announced. However, it remains to be seen how effective the new policy will be in balancing the CBN’s goals of maintaining domestic FX liquidity with the needs of foreign oil firms operating in Nigeria.

Key Questions Remain

While the revised policy offers some concessions, key questions linger. The impact on FX availability in the domestic market is yet to be fully understood. Additionally, it’s unclear how the CBN will determine which types of domestic spending qualify under the new guidelines.

Looking Ahead

The CBN’s move suggests a willingness to find common ground with IOCs. The coming months will be crucial in determining the effectiveness of this revised policy and its impact on Nigeria’s oil sector and broader economic landscape.

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Nigerian banks face cybersecurity levy: Boon or burden?

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Estimated reading time: 4 minutes

Nigeria’s Central Bank (CBN) has mandated all deposit money banks, payment service providers, and mobile money operators to implement a 0.5% cybersecurity levy on all electronic transactions. This directive, aimed at bolstering the country’s cybersecurity defenses, has sparked debate among industry experts and consumers alike.

The levy, effective within two weeks of the May 6th circular, will channel funds into the National Cybersecurity Fund (NCF), overseen by the Office of the National Security Adviser (ONSA). The CBN cites the “Cybercrime (Prohibition, Prevention, etc) (amendment) Act 2024” as the legal basis for the levy.

A circular from the apex bank on Monday disclosed that the implementation of the levy would start two weeks from today.

The circular was directed to all commercial, merchant, non-interest and payment service banks, among others.

The circular revealed that it was a follow-up on an earlier letter dated June 25, 2018 (Ref: BPS/DIR/GEN/CIR/05/008) and October 5, 2018 (Ref: BSD/DIR/GEN/LAB/11/023), respectively, on compliance with the Cybercrimes (Prohibition, Prevention, Etc.) Act 2015.

The CBN said that all banks, other financial institutions and payment service providers are now required to implement the directive, saying, “The levy shall be applied at the point of electronic transfer origination, then deducted and remitted by the financial institution. The deducted amount shall be reflected in the customer’s account with the narration, ‘Cybersecurity Levy’.

“Deductions shall commence within two weeks from the date of this circular for all financial institutions and the monthly remittance of the levies collected in bulk to the NCF account domiciled at the CBN by the fifth business day of every subsequent month.”

Exempted from the levy include loan disbursements and repayments, salary payments, intra-account transfers within the same bank or between different banks for the same customer, intra-bank transfers between customers of the same bank.

Also exempted from the levy were inter-branch transfers within a bank, cheque clearing and settlements, ⁠Letters of Credits, ⁠Banks’ recapitalisation-related funding only bulk funds movement from collection accounts, savings and deposits including transactions involving long-term investments, among others.

Boosting Defenses or Burdening Consumers?

Proponents of the levy view it as a necessary step to address the growing threat of cybercrime in Nigeria. The country has witnessed a rise in fraudulent online activities, from phishing scams and identity theft to targeted attacks on financial institutions. The levy, they argue, will provide much-needed resources to strengthen cybersecurity infrastructure, invest in threat intelligence, and enhance public awareness campaigns.

Opponents, however, raise concerns about the potential impact on consumers and businesses. A 0.5% levy on every electronic transaction, including point-of-sale (POS) payments, online transfers, and mobile money transactions, could translate to increased costs for individuals and businesses that rely heavily on digital payments. Critics argue that the levy might discourage cashless transactions, a key objective of the CBN’s financial inclusion initiatives.

Questions Remain

Several key questions remain regarding the implementation and effectiveness of this levy. How will the CBN ensure transparency and accountability in the management of the NCF? Will the collected funds be directed towards tangible cybersecurity improvements? Additionally, concerns exist regarding the potential for double taxation, as some financial institutions already invest in their own cybersecurity measures.

The Road Ahead

The success of this initiative hinges on a multi-pronged approach. While the levy can contribute to bolstering cybersecurity, it should be accompanied by complementary measures. These include fostering collaboration between the public and private sectors, developing robust cybersecurity frameworks, and upskilling the workforce to address evolving cyber threats.

The CBN’s decision to impose a cybersecurity levy is a bold step towards tackling a growing concern. However, its effectiveness will depend on a transparent and well-managed implementation strategy that minimizes the burden on consumers and businesses while maximizing its impact on improving Nigeria’s overall cybersecurity posture.

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Crunch time for PoS operators as CBN mandates CAC registration by July 7

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Estimated reading time: 3 minutes

The Central Bank of Nigeria (CBN) has issued a directive to Point-of-Sale (PoS) operators across the country, mandating their registration with the Corporate Affairs Commission (CAC) by July 7th, 2024. This move, announced during a meeting with Fintech representatives, aims to strengthen the financial system and protect consumers.

This was revealed during a meeting between Fintechs and the Registrar-General/Chief Executive Officer (CAC) Hussaini Magaji (SAN) in Abuja on Tuesday.

Speaking at the event, the CAC boss said the two-month timeline to register their agents, merchants, and individuals with the commission, was “in line with legal requirements and the directives of the Central Bank of Nigeria”.

“The measure aims at safeguarding the businesses of Fintech’s customers and strengthening the economy,” a statement titled ‘CAC, PoS OPERATORS AGREE TO TWO-MONTH DEADLINE TO REGISTER THEIR AGENTS AND MERCHANTS TO STRENGTHEN THE FINTECH INDUSTRY‘ issued by the CAC added.

He stressed that the action was equally backed by Section 863, Subsection 1 of the Companies and Allied Matters Act, CAMA 2020, and the 2013 CBN guidelines on agent banking.

Magaji explained that the timeline for the registration which will expire on July 7, 2024, was not targeted at any groups or individuals but aimed at protecting businesses.

The urgency surrounding the deadline has raised concerns among PoS operators, particularly regarding the feasibility of completing the registration process within the allotted timeframe. The sheer number of PoS operators – estimated to be around 1.9 million nationwide – presents a logistical challenge for both operators and the CAC.

Unpacking the Rationale

The CBN’s reasoning behind the directive centers on two key objectives:

  • Enhanced Transparency: Registering PoS businesses with the CAC brings them under the legal purview of the Companies and Allied Matters Act (CAMA) 2020. This fosters transparency by establishing a clear legal identity for these entities, allowing authorities to better monitor their activities and ensure compliance with regulations.
  • Consumer Protection: A formal registration process strengthens consumer protection mechanisms. Should any disputes arise between a customer and a PoS operator, a registered business offers a clearer path for recourse and resolution. Additionally, the CBN’s 2013 guidelines on agent banking are cited as a source for this directive, suggesting the aim might also be to standardize PoS operations and ensure adherence to best practices.

Industry Response and Potential Challenges

While some industry players acknowledge the benefits of increased regulation, concerns remain. The tight deadline, coupled with the potentially high volume of registrations, could overwhelm the CAC’s processing capacity. Additionally, smaller PoS operators, particularly those in rural areas with limited access to resources and support, might face difficulties navigating the registration process.

Collaboration for a Smooth Transition

The success of this initiative hinges on effective collaboration between the CBN, CAC, and the Fintech industry. Streamlining the registration process, providing clear and accessible guidelines, and offering support to smaller PoS operators will be crucial. Open communication channels to address any challenges faced during the registration period are also essential.

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Nigeria curtails power exports to neighbours as domestic shortfall persists

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Estimated reading time: 4 minutes

Nigeria has taken a step to prioritize its own struggling power grid by restricting electricity exports to neighboring Benin, Niger, and Togo. The Nigerian Electricity Regulatory Commission (NERC) implemented a six-month interim order, effective May 1st, 2024, capping the amount of power supplied to these countries at 6% of total grid capacity.

The directive, outlined in a document titled “Interim Order on Transmission System Dispatch Operations, Cross-border Supply, and Related Matters,” will be in effect for six months initially, subject to review.

Nigeria currently supplies electricity to neighbouring countries, including Benin Republic, Niger Republic, and Togo.

NERC’s order, published on Friday, May 3rd was dated April 29, 2024, and effective from May 1, 2024, was jointly signed by the commission’s Chairman, Sanusi Garba, and Vice Chairman, Musiliu Oseni.

The document stipulates that power delivery to Nigeria’s neighbours must not exceed six per cent of the total grid electricity at any given time.

The electricity sector regulator expressed concern about sub-optimal grid dispatch practices, which have impacted the ability of Distribution Companies to meet their Service Tariff commitments to end-user customers.

“The reliance on limiting Discos’ load off-take while prioritizing international off-takers and Eligible Customers has proven neither efficient nor equitable.”

This decision comes amidst a persistent metering gap within Nigeria’s own power sector. Meters are crucial for accurately measuring electricity consumption, allowing for fair billing and improved revenue collection for distribution companies. Without proper metering, many consumers are not billed accurately, leading to financial losses for the system and discouraging investment in generation and transmission infrastructure.

Part of the document read, “The commission hereby orders as follows: The system operator shall develop and present to the commission for approval within seven days from the issuance of this order a pro-rata load-shedding scheme that ensures equitable adjustment to load allocation to all off-takers — Discos, international customers, and eligible customers — in the event of a drop in generation and other under-frequency related grid imbalances necessitating critical grid management.

“The system operator shall implement a framework to log and publish hourly readings and enforce necessary sanctions for violation of grid instructions and contracted nominations by off-takers in line with the grid code and market.

“The aggregate capacity that can be nominated by a generating plant to service international off-takers shall not be more than 10 per cent of its available generation capacity unless in exceptional circumstances a derogation is granted by the commission.“The system operator shall henceforth cease to recognise any capacity addition in bilateral transactions between a generator and an off-taker without the express approval of the commission,” it added.

The NERC’s order prioritizes supplying Nigerian consumers, a move likely welcomed by citizens facing ongoing power outages. However, it could strain relations with neighboring countries who rely on Nigerian electricity imports. Benin, Niger, and Togo may face increased power cuts or be forced to seek alternative, potentially more expensive, sources of electricity.

The situation highlights the complex challenges facing Nigeria’s power sector. While the country boasts significant generation capacity, inadequate transmission infrastructure and metering issues hinder its ability to deliver reliable electricity domestically and fulfill export commitments.

It remains to be seen whether the six-month restriction will be extended. The effectiveness of the measure will depend on Nigeria’s progress in addressing its metering gap. Increased investment in metering infrastructure and stricter enforcement of billing practices could pave the way for a more sustainable solution, allowing Nigeria to meet its domestic needs while potentially resuming exports in the future.

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Naira in circulation hits N3.87trn, raising economic concerns

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The Central Bank of Nigeria (CBN) reported that the value of Naira in circulation climbed to N3.87 trillion at the end of March 2024. This represents a steady rise from N3.65 trillion in January and N3.69 trillion in February. While the increase suggests more cash flowing in the economy, analysts warn it could also point towards potential inflationary pressures.

According to the latest money and credit statistics on the website of the Central Bank of Nigeria, the currency in circulation was N3.87tn, higher than N3.69tn in February and N3.65tn in January.

However, currency outside banks have also increased progressively during the first quarter, growing from N3.28tn in January to N3.41tn and N3.63tn in February and March, respectively.

The data revealed that over 90 per cent of currency in circulation is held outside of the banking system, indicating Nigerians are holding more cash.

Several factors might be contributing to this rise in circulating currency. One explanation could be an increase in economic activity, leading to a higher demand for cash for everyday transactions. Another possibility is that due to recent restrictions placed on mobile payment operators like Opay and Palmpay, Nigerians might be turning towards cash for transactions they previously conducted digitally.

However, economists also caution that a significant rise in physical currency can be a sign of growing inflation. When more naira are chasing a limited supply of goods and services, prices tend to rise. This can disproportionately affect low-income earners who see their purchasing power diminish.

The CBN will need to monitor the situation closely. While a certain level of cash circulation is essential for a healthy economy, excessively high levels can fuel inflation. The CBN might consider implementing measures to mop up excess liquidity, such as raising interest rates or selling government bonds.

It’s important to note that this is just a single data point, and a more complete picture would require analyzing it alongside other economic indicators like inflation rates and economic growth figures. Nevertheless, the rise in currency circulation is a noteworthy trend that warrants close attention from policymakers and economic analysts in the coming months.

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NERC unbundles TCN, forms Nigerian Independent System Operator

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The Nigerian Electricity Regulatory Commission (NERC) has announced the unbundling of the Transmission Company of Nigeria (TCN), forming the Nigerian Independent System Operator of Nigeria Limited (NISO).

This decision was communicated via a circular dated April 30th.

Under this move, TCN will delegate all market and system operation responsibilities to the newly established entity.

Previously, NERC had granted transmission service provider (TSP) and system operations (SO) licenses to TCN, aligning with the Electric Power Sector Reform Act.

However, the Electricity Act 2023, which came into effect on June 9, provided clearer guidelines for the incorporation and licensing of the independent system operator (ISO), as well as the transfer of assets and liabilities of TCN’s portion of the ISO.

Therefore, in the circular, the commission ordered the Bureau of Public Enterprises (BPE) to incorporate, unfailingly on May 31, a private company limited by shares under the Companies and Allied Matters Act (CAMA).

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The company, NERC said, is expected “to carry out the market and system operation functions stipulated in the Electricity Act and the terms and conditions of the system operation licence issued to TCN”. 

“The name of the company shall, subject to availability at Corporate Affairs Commission, be the Nigerian Independent System Operator of Nigeria Limited (“NISO”),” NERC said.  

Citing the object clause of the NISO’s memorandum of association (MOU) as provided in the Electricity Act, NERC said the company shall “hold and manage all assets and liabilities pertaining to market and system operation on behalf of market participants and consumer groups or such stakeholders as the Commission may specify”. 

The new ISO, the commission said, will also be responsible for negotiating and entering into a contract for the procurement of ancillary services with independent power producers and successor generation licensees.

Also, it will generally carry out market and system operations functions as specified under the Electricity Act and the terms of its licence in the interest of market participants and system users.

NERC said the company is expected to carry out all market and system operation-related contractual rights and obligations handed over by TCN.

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Nigeria, India poised for smoother trade ties with local currency pact

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Nigeria and India are on the verge of finalizing a local currency settlement system, a move that could significantly boost bilateral trade between the two economic giants. This agreement, currently in its final stages of negotiation, was a key outcome of the recent India-Nigeria Joint Trade Committee meeting held in Abuja.

The focus of the meeting was on areas of shared interest between both countries, especially bilateral trade and the inherent growth potential.

The statement reads, “To this effect, both sides identified several areas of focus for enhancing both bilateral trade as well as mutually beneficial investments. These include resolving of market access issues of both sides, and cooperation in key sectors such as Crude oil and Natural Gas, Pharmaceuticals, Unified Payments Interface (UPI), Local Currency Settlement System, Power Sector and Renewable Energy, Agriculture & Food Processing, Education, Transport, Railway, Aviation, MSMEs, Development etc.

“Both sides agreed to early conclusion of Local Currency Settlement System Agreement to further strengthen bilateral economic ties.”

Traditionally, international trade relies on converting currencies through a third party, often the US dollar. This process incurs transaction costs and exposes businesses to exchange rate fluctuations. A local currency settlement system eliminates these hurdles by allowing direct exchange between the Naira and the Rupee, facilitating smoother and potentially cheaper cross-border transactions.

This agreement holds promise for several reasons. First, it can simplify trade finance, a crucial aspect for businesses, especially small and medium enterprises (MSMEs). Reduced transaction costs can incentivize increased trade volumes in sectors like pharmaceuticals, agriculture, and oil & gas, which form the backbone of India-Nigeria commerce.

Second, the pact could foster greater financial integration between the two countries. As the use of local currencies becomes more commonplace, banks and financial institutions may develop new products and services tailored to facilitate India-Nigeria trade. This could create a more robust financial ecosystem supporting bilateral economic activity.

However, some challenges remain. Establishing a functional local currency settlement system requires robust infrastructure and efficient communication channels between the central banks of both countries. Additionally, ensuring sufficient liquidity in both the Naira and the Rupee for cross-border transactions will be crucial for the system’s success.

Despite these challenges, the potential benefits of the local currency pact are undeniable. It signifies a growing economic partnership between Nigeria and India and paves the way for a more efficient and mutually beneficial trade relationship. As the agreement is finalized, businesses in both countries can prepare to leverage this new framework and explore the vast opportunities it presents.

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Oyo State set for gas transformation: Analysing Shell’s pipeline deal

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In a move with significant implications for Oyo State’s industrial development, Shell Nigeria Gas (SNG) signed an agreement with the state government to build and operate a gas distribution network. This pipeline infrastructure, spanning an initial 15 kilometers, aims to deliver natural gas to industrial and commercial users across the state for the next 20 years.

A statement released on Friday by Shell Nigeria’s Media Relations Manager, Abimbola Essien-Nelson, disclosed that SNG will build and operate the gas distribution network which will serve customers across Oyo State for 20 years.

According to the statement, the project will start with the construction of gas distribution infrastructure along a 15km pipeline route, adding that it will grow to deliver up to 60 million standard cubic feet of gas per day across the state.

Speaking at the signing ceremony, the Oyo State Governor Seyi Makinde, described the project as a catalyst for development in the state.

Makinde said, “This project fits into our plan to drive innovation and industrialisation in Oyo State and we’re ready to partner with more companies and other organisations to enhance the delivery of relevant projects”.

Speaking, the Managing Director of SNG, Ralph Gbobo, noted that the agreement was “a significant milestone for SNG and Oyo State to boost economic activities in Nigeria by supplying industries and manufacturers with natural gas, a more reliable, cost-efficient and environmentally friendly source of energy.”

Boosting Industry and Manufacturing

Analysts view this project as a potential catalyst for Oyo’s economic growth. Easy access to natural gas offers several advantages over traditional fuels like diesel. Firstly, natural gas burns cleaner, reducing air pollution and aligning with Nigeria’s push for cleaner energy sources. Secondly, natural gas is often more cost-effective, potentially lowering production costs for industries in Oyo. This could improve their competitiveness and lead to increased investment and job creation.

Initial Phase and Expansion Potential

The initial 15km pipeline signifies the first stage of the project. With the capacity to deliver 60 million standard cubic feet of gas per day upon expansion, this infrastructure offers substantial potential for future growth. This scalability could prove crucial for attracting new industries to the state, especially those requiring significant gas supplies.

Challenges and Considerations

While the project presents exciting possibilities, challenges remain. The environmental impact of constructing and operating the pipeline needs careful assessment and mitigation measures. Additionally, ensuring fair pricing and equitable distribution of gas throughout Oyo will be crucial for maximizing the project’s benefits.

Overall, Shell’s agreement to build gas pipelines in Oyo marks a significant development with the potential to transform the state’s industrial landscape. The project’s success will depend on effective implementation, addressing environmental concerns, and ensuring widespread access to this cleaner and potentially cheaper fuel source.

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Africa faces shortage of qualified seafarers despite global demand

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A new report by the International Transport Workers Federation (ITF) reveals a significant underrepresentation of African seafarers in the global maritime industry. Only 78,000, or a mere 7.8%, of the over 1 million certified seafarers working on international merchant ships hail from Nigeria and other African nations.

This concerning statistic was highlighted by ITF Africa Regional Secretary Safiyanu Muhammed during a recent working visit to Lagos. The purpose of the visit, which included meetings with the Nigerian Merchant Navy Officers and Water Transport Senior Staff Association and the Maritime Workers Union of Nigeria, was to address challenges faced by African seafarers and explore ways to enhance their participation in the global shipping industry.

Muhammed emphasized the stark contrast between Africa and established seafaring nations like the Philippines and India. He further noted that the International Maritime Employers Council is actively seeking to employ African seafarers, but the current lack of qualified personnel is a major hurdle.

“Among the statistics that I have, roughly about 1 million certified seamen that we have globally, only 78,000 are Africans. You can’t compare this number with what we have in the Philippines and India, not to talk of Ukraine.

“We have ships doing business here but you see foreigners working on board. Why? I understand there is a policy for a waiver but why do you have to give waivers when you have capable Nigerians that can do the job,” he noted.

This situation presents a missed opportunity for both African nations and the global shipping industry. By investing in training programs and addressing potential barriers to entry, Africa could unlock a significant pool of talent to meet the growing demand for qualified seafarers.