Breaking down Nigeria rebased $510 billion GDP

Nigeria revealed rebased gross domestic product (GDP) figures for 2013 that showed an 89 percent jump in the estimated size of its economy.

The new rebased data show that the size of the Nigerian economy is now estimated at N80.3 trillion ($510 billion) for 2013, Yemi Kale, head of the National Bureau of Statistics (NBS), said at a press conference to announce the results in Abuja.

The new figures show that Nigeria has surpassed South Africa as the largest economy in Africa after overhauling its GDP data for the first time in two decades.

Rebasing/re-benchmarking of the national account series (GDP) is the process of replacing an old base year to compile volume measures of GDP with a new and more recent base year or price structure.

Economies are dynamic in nature: they grow, they shrink, add new sectors, new products and new technologies, and consumer behaviour and tastes change over time.
Until now, the GDP estimates for Nigeria have been based on a base year of 1990, which means that current GDP (say for example 2013 GDP) are expressed in terms of prices of goods and services in 1990.

The rebased figures showed a remarkable change in sector by sector contribution to the country’s GDP.

Hitherto, the agric sector used to be the dominant contributor to the Nigeria GDP but that has been diluted as other sectors such as finance services, construction, entertainment etc. have braced up their contribution to the economy.

The 2013 rebased figures showed the agric sector contributing 21.97 percent or N17.625 trillion ($112.26 billion) of the total N80.22 trillion ($510 billion). This compares with N14.71 trillion ($93.7 billion) in the old non-rebased estimates for 2013.

Nigeria’s agricultural output while seemingly impressive is actually underperforming its peers such as Argentina with its mostly subsistence method of cultivation and low productivity.

Almost half of the available arable land is uncultivated, while there is very little irrigation of fields or farmlands. The government has come out with a plan, however, to change all that.
Nigeria plans to double agriculture’s share of banks’ credit to 10 percent in two years as it seeks to cut food imports, agriculture minister Akinwunmi Adesina said recently at the World Economic Forum in Davos, Switzerland.

Loans to agriculture as a share of total credit rose to N320 billion ($2 billion) or 5 percent at the end of last year from less than 1 percent in 2011, Adesina said.

The Agriculture Ministry is partnering with the Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending, a unit of the Central Bank of Nigeria (CBN), to provide credit guarantees to enable banks lend to farmers.
The government’s efforts to boost food supply by 20 million metric tons from 2011 to 2015 has seen the country’s food import bill drop by more than half to $5 billion from $11 billion two years ago.

Manufacturing

The manufacturing sector of the economy contributed 6.81 percent to the new GDP data equivalent to N5.47 trillion ($34.8 billion) out of the total 2013 GDP rebased estimate of N80.22 trillion ($510 billion).This compares with N4.74 trillion ($30.2 billion) in the 2012 GDP figures.

The manufacturing sector has been receiving tremendous boost through Federal Government proactive policy formulations.
To boost local production of cement product, and increase its contribution to the GDP, the Ministry for Trade and Investment did not issue a single licence for the importation of cement in 2013, which has traditionally been a huge drain on Nigeria’s foreign exchange.

In addition, the ministry has also designed the Nigerian Automobile Industry Development Plan to provide the environment for the orderly development of the sector.
In 2013, the Trade and Investment Ministry entered into agreement with foreign investors to assemble automobiles in Nigeria with a view to boosting the contribution of manufacturing to the Nigeria’s GDP.

Other backwards integration policies have been formulated in the sugar, rice milling, wheat and tomato manufacturing sectors.
In spite of the rise in manufacturing’s contribution to GDP from about 4 percent in the non-rebased time series to 6.81 percent in the rebased data, Nigeria still underperforms its peer countries in manufacturing.

World Bank data show contribution of manufacturing sector to the GDP in Austria is 19 percent, while that of Thailand remains 34 percent. For South Africa, it is 12 percent, while it is 13 percent for Iran.

In Nigeria, manufacturers often groan under high inter-bank interest rate, which hovers between 18 and 30 percent. Lending is cheaper in microfinance banks but there is often a ceiling to the amount to be lent. Though the Bank of Industry (BoI) lends to critical players at an interest rate of between 6 and 10 percent, access is still cumbersome, say manufacturers.

The manufacturing sector has the capacity to create direct and indirect jobs. NBS data show that many of the jobs created in 2013 were from manufacturing, construction and financial intermediation. Increase in job generation from the manufacturing sector in 2013 was 63.20 percent. Analysts attribute this to waivers and incentives given to cement, sugar and manufacturing exporters within the period and say development of the sector will increase foreign exchange earnings, create wealth and develop subsidiary sectors.

Real Estate

The real estate sector contributed 8.01 percent to the Nigerian economy equivalent to N6.43 trillion ($40.9 billion) of the total rebased GDP estimate of N80.22 trillion ($510 billion).
The sector’s contribution to GDP while impressive has, however, happened without a comprehensive plan by government – until recently – to boost its growth.
Constraints to the sector’s growth include the notoriously problematic Land Use Act as well as difficulty in getting building permits and certificate of occupancy in many states.
The lack of easy transferability of titles and non-securitisation of mortgage loans where available and lack of mortgages in general are also a factor stunting the sector’s growth, in spite of Nigeria’s huge unmet demand for housing.
Nigeria’s Mortgage Refinance Company which will imitate the U.S.’s mortgage giant Fannie Mae hopes to plug some of these gaps.

It plans to sell bonds in the capital markets in a bid to curb the estimated 17 million- unit housing deficit.

The bonds when sold on the market by the new company (Nigeria Mortgage Refinance Co.) will provide long term financing to lenders that will help them extend more home loans.
It is expected that the new mortgage company will help put the economy on a higher trajectory of growth as home buyers are extended as much as 20 years maturities on mortgage loans; and as a result, 75000 new homes a year will be built, culminating in the creation of at least 300,000 jobs.
To finance the transaction, the Federal Mortgage Bank of Nigeria (FMBN) last year negotiated with two Chinese lenders for credit of as much as $6 billion.

With the establishment of the new company, a long term yield curve for pricing financial assets will finally be established with the potential of the creation of sophisticated financial instruments, such as mortgage backed securities (MBS) so that much more efficient capital deployment will be achieved.

The country’s rapid rate of urbanisation which the World Bank put at 51 percent in 2012, and the estimated 80 million living in the cities will spur the demand for housing and building materials, and, therefore, making the new refinancing scheme the right trajectory to providing shelter for the people.

The MRC model has been used in a number of countries to help stimulate the housing market, deepen home ownership and stimulate gross domestic product (GDP) growth.

In the United States the two housing-finance giants Fannie Mae and Freddie Mac have helped to expand home ownership in the US to historical highs, as well as engender wealth creation and jobs. Fannie Mae and Freddie Mac are estimated to own or have guaranteed about 60 percent of the U.S.’s $12 trillion mortgage market as at 2010.

Crude Petroleum and Natural Gas

Crude petroleum and natural gas which comes under the mining and quarrying s ector contributed 14.4 percent or N11.55 trillion ($73.56 billion) to the total 2013 rebased GDP.

This paints both a positive and negative picture for the Nigerian economy as while it shows that the economy is gradually weaning itself off its oil and gas dependence, there still remains a huge untapped potential in Nigerian oil and gas output that has remained stagnant for the past 5 years.

Nigeria’s oil output is stuck at around 2 million barrels a day, while gas production for NLNG export and domestic use has also been affected by a lack of investments in new NLNG trains and gas processing infrastructure.

The passage of the long delayed Petroleum Industry Bill (PIB) may help boost investments into the sector, even as Nigerian oil and gas firms are becoming increasingly active in the sector.
Domestic Nigerian firms such as Seplat, Oando, Seven Energy, Sahara oil, Brittani-U and Dangote Industries Limited are priming to invest in the oil and gas sector, buoyed by divestments from international oil companies (IOCs).

Stakeholders estimate that Shell, Total and Agip divested from Nigerian assets worth $6.5 billion in 2013.

Nigeria has the world’s ninth-largest proven gas reserves at 188 trillion cubic feet and potential gas reserves of 600 trillion cubic feet (TCF), however, much of it is flared.

At least $3 billion in revenue is lost annually due to flaring, according to the Petroleum Ministry, while a lack of gas for power plants stunted Nigeria’s double digit growth potential.

Telecommunications and Information Services

The telecommunications and information services sector contributed 8.68 percent to the Nigerian economy equivalent to N6.97 trillion ($44.3 billion) out of the total rebased GDP estimate of N80.22 trillion ($510 billion). This compares with N364.4 billion ($2.3 billion) in the 2012 non-rebased GDP time series.
Telecommunications is the star performer in Nigeria’s rebased GDP figures.

The licensing of GSM companies earlier last decade has led to an unleashing of economic activity from e-commerce to mobile payments.

Nigeria currently has about 120 million mobile phone subscribers, with four major mobile service providers including MTN, Airtel, Globacom and Etisalat. The potential in the sector can be seen in MTN which reported 2013 full year revenues of N793.6 billion for its Nigerian operations.

Nigeria had 56 million internet subscribers as at September 2013, according to data from the NCC, while international bandwidth brought by undersea cables, has increased about 26 times to more than 9,000 gigabits per second (9 terabits) over the past four years.
One market research firm suggests that Nigeria, which is Africa’s most populous country, will have almost tripled its online purchases in just three years to more than $1 billion by 2014.

This compares with South Africa, whose e-commerce sales were just 4 billion rand ($409 million) last year, according to research firm, World Wide Worx, estimates.

The number of payments in Nigeria made by mobile phone’s more than doubled to 2.4 million in the first half of 2012 from the same period a year earlier, while Internet payments rose 9.3 percent, according to data from the Central Bank of Nigeria (CBN).
The improving connectivity and increase in businesses done online is also spurring the need for data centers.

MainOne Cable Co Ltd., which operates an undersea cable connecting West Africa to Europe, plans to open a $25 million data center in Nigeria by June 2014.

The center will provide reliable Internet access and host information for clients such as banks, phone companies, government bodies, and a growing number of dot-com businesses, MainOne chief executive officer, Funke Opeke, said recently at the center’s construction site in Lagos.

Nigeria also plans to grow its mobile broadband access to 80 percent of the population and fixed broadband access to roughly 20 percent by the year 2017 from 4 percent now, according to the National Broadband Plan 2013-2018.

PATRICK ATUANYA & BALA AUGIE, BusinessDay

Nigeria is 26th largest economy globally with $510 billion GDP

The Nigerian economy now ranks as the 26th largest in the world, figures released from the recently rebased or recalculated Gross Domestic Product (GDP) reveal.

The statistician-general of the federation Yemi Kale, says the country’s GDP now stands at $510 billion, making it the largest economy in Africa.

“The economy’s structure has changed significantly,” said Kale while releasing the 2013 rebasing figures in Abuja the country’s Capital, Sunday. “We are witnessing a historic rebasing of our GDP which was not done for more than two decades,” Kale said.

He further said the exercise was able to capture more sectors of the economy.

Analysis by the statistician-general reveals that rebased Nominal GDP figures in 2010 increased by 59.5 to N 54.2 trillion ($345 billion) from N33.9 trillion ($218 billion), while in 2011 it spiked by 69.1 percent to N63.2 trillion ($402 billion) from 34.11 trillion ($217 billion).

In 2012, the GDP expanded by 75.58 percent to N71.4 trillion ($453 billion) from N40.5 trillion ($258 billion), while in 2013 it surged by 59.22 percent to N80.3 trillion ($510 billion).

“The next rebasing will be in 2015 and the results will be out in 2016, we also intend to measure the economy every five years,” the statistician said.


 Author: BALA AUGIE, BuisnessDay

Nigeria soon to be the largest economy in Africa

LAGOS, April 4 (Reuters) - Nigeria will rebase its GDP on Sunday, the statistics office said, in a move that will boost its estimated size by anything from around 40 to 70 percent and is almost certain to push it ahead of South Africa to become Africa's biggest economy.

The National Bureau of Statistics (NBS) will change the base year for calculating Nigeria's GDP to 2010 from 1990 to reflect changes in the economy of Africa's most populous nation, and more accurately assess the size of its current output.

Most governments overhaul GDP calculations every few years to reflect changes in output and consumption, but Nigeria has not done so since 1990, meaning sectors such as the Internet, telephones and even the "Nollywood" film industry have had to be newly factored in to give a truer picture, sources say.

When Ghana rebased in 2010, output jumped 60 percent. For Nigeria being the continent's number one economy could prove an irresistible magnet for investors.

Nigeria's GDP only needs to go up by a quarter from a current IMF 2013 estimate of $292 billion to hit $365 billion, which would enable it to overtake South Africa, currently estimated by the fund at $353 billion.

"The impact of a rebasing would likely have a positive impact on perceptions ... this would come at time when most investors are fairly downbeat on South Africa," because of its high combined fiscal and current account deficit, London-based economist for CSL Stockbrokers, Alan Cameron, said.


"GROWTH STORY"

Nigeria has been growing as a destination for foreign investors owing to the size of its consumer market and increasingly sophisticated capital markets. Analysts say higher GDP means more consumption per capita, boosting its allure.

"The globe is still looking at the next strong growth story outside China and India, and Africa is on their minds," said Abri Du Plessis, chief investment officer at Gryphon Asset Management, which has investments in Nigeria.

"We are seeing good growth in the ... Nigeria story."

It is already a growing market for consumer goods firms like Nestle, Heineken, Cadbury and Unilever, as well as construction material firms like Lafarge and Dangote Cement, owned by Africa's richest man Aliko Dangote.

Much increased interest would be in manufacturing and service companies, which could further help Africa's top oil producer move away from its over-reliance on the black stuff.

It certainly won't be the wonder cure for Nigeria's economic ills. For one thing, being bigger means expansion will slow.

"The rebasing exercise will result in an increase in the country's market size, but it is likely to lead to a slower rate of real GDP growth," said Ecobank economist Gaimin Nonyane, from its current rate of 7 percent for the past five years.

It will be mixed for Nigeria's fiscal stance as well, improving the debt-to-GDP ratio, currently less than 20 percent, but expose a weaker tax base, so debt investors won't be moved.

"Fixed income investors will probably not pay much attention to the GDP dynamics," said Standard Bank's Samir Gadio.

Despite roaring growth in recent years and a bigger GDP, Nigeria will continue to trail South Africa in terms of basic infrastructure - power and roads - necessary to lift the bulk of its population of 170 million out of absolute poverty.

And its legendary dysfunction - abysmal telephone and Internet quality, clogged roads, ports and airports, obstructive police and reliance on diesel generators for most of its power - mean it won't be replacing South Africa as a hub very soon.

"South Africa is going to stay the entry point for funds into Africa. I don't think (it will move to) Nigeria," Rigaardt Maartens, a portfolio manager at PSG Online Securities, said.

(Additional reporting by Helen Nyambura in Johannesburg; Editing by Tim Cocks and Giles Elgood)

Smart phone sale hit 25.6 million units in 2013

by Obodo Ejiro

Some 25.6 million units of smart phones were sold last year according to data released by GFK, an international market research company with an office in Lagos. The data, which was made available exclusively to BusinessDay, showed the distribution of sales of some electronics. It confirmed that Lagos still commands the highest share of sales across the country.

Interestingly, more phones were sold in the Northern zones than in the south (excluding Lagos). While 10.5 million phones were sold in Lagos along, 7.9 million were sold in the north while 7.1 million were sold in the south (excluding Lagos).

Based on BusinessDay Research and Intelligence Unit (BRIU) calculations, assuming, the average smart phone cost N10, 000, then it will be safe to assume that at least N256billion was expended on smart phones in Nigeria last year!

Also included in the data set released by GFK were records on flat panel TVs sales and audio home systems. Both products recorded significant amounts of patronage as 853,124 flat panel TVs and 363,928 audio home systems were sold across Nigeria last year.

According to GFK, “what is most remarkable is the preference for bigger screen sizes. Nearly 8 out of every 10 TVs being sold is 32 inches and above. This shows a remarkable shift from the previous cathode ray tube TV models that were mostly 21 inches and below that were in most Nigerian homes”.

As with smart phones, more flat panel TV sets and audio home system were sold in Lagos than anywhere else. Some 399,778 units of TV sets were sold in Lagos, in the other states which make up the south, 282,050 were sold while the north recorded 171,296 units in sales of flat panel TV sets.

BRIU estimates that TV sets worth N60 billion were sold last year based on an average price of N70,000 per unit. As with the other products, more audio home systems were sold in Nigeria’s commercial capital, Lagos.

Earlier in the year, information made available from the Ministry of Trade and Investment indicated that retail attracted $1.3 billion in investment in the last two years. The data released by GFK points to growing consumption in Nigeria and its volume.

Nigeria now has 8 cities which have populations above 1 million people and estimates from BRIU show that more cities in the country will have populations above that number in the next six to seven years.

This is occurring in the midst of rising income levels, and urbanization. BRIU’s retail report has indicated at increasing acceptance of western values and lifestyles among Nigerians living in urban areas is one of the factors driving consumption in Nigeria. 

“Though 60% of people living in Nigeria live on less than one dollar daily, it must be underscored that the remaining 40%, is 16.4 million more than the population of South Africa. The largest of Nigeria’s cities are Lagos city with a population of 10.1 million people, Kano city with a population of 4.1 million people and Ibadan city with population of 3.8 million people” a BRIU report indicated earlier this year.

Cities like Kaduna, Port Harcourt and Benin City have population figures estimated at 1.8 million, and 1.3 million respectively. Aba, which is the least of the eight most populated cities in Nigeria, has a population of 1 million people the BRIU report indicates.

According to BRIU, “the most attractive locations for new retail outlets are often the first tier cities of Lagos, Port Harcourt and Abuja, due to the sophistication of the population, the population density, ease of access to retail outlets, and superior infrastructure.

But as those cities become more saturated, Nigeria’s second tier cities become also important.  As at year end 2013, the country had an estimated population of 171 million population.

This number has attracted a lot of interest because of the population’s rising capacity to consume an assortment of goods and services.

Seizing Nigeria’s retail opportunity

Obodo Ejiro

These are exciting times for retail in Nigeria! Product offerings is expanding, investment is pouring in from around the world, sophisticated outlets are springing up, and more funds are available to serious “retail practitioners” to access.

Interestingly, development in the sector is not confined to reports and government statistics. The data available from the National Bureau of Statistics as well as the Central Bank corroborate the facts on ground. More than ever, what we are seeing is evidence that the sector is gathering and sustaining momentum.

Unlike in the wholesale and retail sector, the past two years has seen oil’s growth and contribution to Nigeria’s GDP diminish in the face of vicious attacks from crude oil thieves.

In the first halves of 2011, 2012 and 2013, wholesale and retail contributed 15.58 percent, 17.05 percent and 18.44 percent respectively to Nigeria’s GDP. Also, in terms of growth rate, the sector grew by 19.89 percent, 14.72 percent, and 14.51 percent respectively within the same period.

On the flip side, the oil sector recorded negative growth by half year 2012 and 2013. Indeed, retail outperformed all other sectors, including building and construction which traditionally grows fast in a developing country which is serious about progress.

It’s interesting that the changes taking place in the sector offer a number of outstanding opportunities, not just for the demand side of the sector but also the supply side. To the demand side, opportunities have come in form of availability of a broader consumption spectrum, better environments for shoppers, and competition which has made services from retailers better.

On the supply side, a huge market, moderate returns and the guarantee that once brought in, products will be sold is significant comfort for savvy businessmen. But as the market develops there is more to it than this especially in the area of financing. Indeed, more funds are available at the disposal of those who are worthy and really need it to grow their retail businesses.

One of such is the special Market Modernization Fund (MMfund). The MMfund is a financial instrument introduced and financed by the UK department for Development (DFID) and managed by the GEMS Wholesale and Retail Sector Programme (GEMS4). It is a £3.5 million private sector development matching grant fund aimed at stimulating economic growth, improved performance, employment opportunities, and increased incomes in the wholesale and retail sector in Nigeria, with a focus on the foods and fast moving consumer goods (FMCG) important to Nigeria’s poor and women.

Grant funds are awarded to eligible firms through a two- stage competitive application process. Successful bids can receive up to a maximum of £250,000 depending on the funding window. The competition is open solely to organizations registered and operating in Nigeria for proposals to be implemented in Nigeria.

For a market which has as a major challenge, the availability of funds to SMEs, this fund is a relief for eligible firms who meet the criteria for engagement. Ultimately, the MMfund seeks to encourage private sector participation and investment in the development and adoption of new and inclusive business models by demonstrating innovative and successful ways in which businesses operating within the Wholesale and Retail sector can operate commercially and profitably, and work with and for the poor.

The Fund intends to support businesses engaged in the wholesale and retail sector; and related support service providers (such as distribution, intelligence, merchandising and exchange (trade),financial services, and ICT) to pilot or scale up successful projects that meet the eligibility criteria and contribute to the achievement of the fund’s objectives.

But not all funds are coming from external sources; a number of local banks including Diamond bank, Fidelity bank, First bank among others are in the forefront of promoting the activities of retailers, through a variety of tailoured services, including interest sensitive loans.

And what is more? As an organization committed to the development of retail business in Nigeria, BusinessDay is doing what it can to enrich knowledge on the sector through the release of its 2014-2015 retail report, and its annual conference which comes up next week.

The “Retail Report 2014-2015” which is a product of BusinessDay’s Research and Intelligence Unit is now available for the public. It is a book which offers information about the performance of local retailers, developments in the sector, it examines those companies which are driving development in the sector, who is financing the sector and the financing gap which still exists.

The report also deliberately draws attention to the sections of the country where opportunities exist and the specific models which work in those locations. More importantly, it gives indication as to what Nigerians are even buying in the first place. All of this is done after a thorough background of the Nigerian economy has been examined in light of the future of retail.

On the other hand, the conference which holds next Friday brings together major retail players, it is designed to be a session where strategy and the changing face of wholesale and retail is discussed in Nigeria.

Forever owó dà

Unauthorised revenue collectors compound the problems of small businesses in Lagos, writes OBODO EJIRO.

When the Peugeot truck carrying Mr Ezenwa Okonta’s consignment stopped in front of his shop, he alighted from the passenger seat and was immediately accosted by two groups of young men, desperate for his attention.

The leader of the first group was interested in being paid to offload the books, which had just arrived from the UK, while the leader of the second group, composed mainly of natives, repeatedly called out in an aggressive baritone, “owò dà, san owò ile!” (Yoruba for “where is money, pay for this ground”).

This is a common sight in Lagos, as groups of unauthorised youths parade themselves as revenue collectors that milk defenceless small businesses. They present themselves in different shades and operate across the state, but have one logic. To them, Lagos is their heritage and to do business here, businessmen must pay different sums of money before being allowed to carry out legitimate activities like the one Ezenwa was about to embark on.

On this hot afternoon, in order to be allowed to offload his books, Ezenwa was glad to part with N15, 000 ($92) instead of N20, 000 ($122), which his colleague paid a few days earlier.

That the activity of the illegal collectors is harming businesses is an understatement. The most visible impact is the higher prices customers have to pay, as businesses push part of the unlawful costs they bear to customers.

Bigger still is the impact on the ease of doing business in the city. The harassment and aggression of the collectors have a negative impact on the ‘animal spirit’ of businessmen.

Also, many businessmen believe that one way or the other, the state government benefits from this activity, but the government directly or indirectly denies this.

When an official at the office of the Special Adviser to the Governor on Taxation and Revenue was asked about what government was doing to stop the collectors, she said “… we must correct the impression; what they (illegal fund collectors) collect is not classified as taxes by the state government. It’s totally illegal.

“It’s sad that before this dispensation, even government contractors were not free from these miscreants. Contractors had to factor in monies given to miscreants when they gave project estimates to government. But the present governor stopped that practice.”

This is not an official statement from the government, since the official claimed she was not authorised to speak to the press. Attempts to reach the governor’s Special Adviser on Taxation and Revenues for an official comment were unsuccessful as he was busy on other assignments.

“The government is aware of this extortion and no one is doing anything to stop it,” says Ezenwa, as he mopped sweat from his obviously sad face. This menace affects even property developers. Builders are forced to pay when laying the foundations of new houses; they also have to pay when they are renovating existing buildings. All of this extortion is done by youths who should either be in school or be gainfully employed in more noble endevours.

While big and highly connected businessmen suffer less, smaller ones face the full brunt of the collectors. But traders are not the only ones who face this problem.

Just in front of Ezenwa’s shop, a group of Toyota Coastal buses are parked, one at a time, they meander through the streets from Ojuelegba to Ijeshatedo with passengers. The operators of these buses also face the fury of unauthorised fund collectors, as young men draped in all manner of uniforms (white, green, yellow, blue and plain clothes) jostle over one another for slices of the small amounts these transporters make.

Though some say they are authorised by local governments, it is a Herculean task to distinguish between those backed by law and those that are not.

On this route, a transporter pays N6, 500 ($40) to different groups in the morning, in the afternoon, he pays N850 ($6), while he pays N2, 300 ($15) in the evening. On Sundays, the amount paid is doubled.

The enormity of what is collected can be better understood if one considers the fact that there are 50 coastal buses on this route, most of which operate daily.

Lamenting the level of extortion, Segun Obey, a bus conductor who has worked on several routes in Lagos, says “we would have been richer if these collectors didn’t exist. If government wants funds from us, why not make the process more formal.”

“What makes it worse is that they beat us up when we don’t have the money to pay,” he says further, as he touches a cluster of scars on his left hand.

For transporters who do not comply with the demands of these collectors, the consequence could be very sever: either the transporter or his conductor is beaten severely or their vehicle is vandalised. It is therefore common to see hoards of fiendish collectors harassing a transporter who has defaulted.

Smaller transporters are not left out of the collection dragnet. “It’s all a bunch of confusion,” says Ayo Olatunde, a young tricycle rider, who conveys passengers from Ijesha to Kpako. “I took up this job because I couldn’t get anything else, however; I’m left with almost nothing after settling different collectors, fuelling the tricycle and giving the agreed sum to the owner of the tricycle.”

In the case of tricycles operating on the route, the police are also involved in the collection process.

Though the police do not collect funds directly, they designate civilian to do the collection while they stand afar off. When asked about measures the force is taking to stop this practice, the Lagos State Police Public Relations Officer, Ngozi Braide, says “we run a very transparent organisation. I do not believe that this is really happening because no one in the area has come to complain to me.”

Just two months ago, two officers, caught on camera extorting motorists were sacked.

Indeed, there is no question as to the illegality of police extortion in Lagos, but what has remained certain is that only those that are caught red-handed are disciplined. “The police also constitute a huge leak to our fund flows,” says Olatunde, “as tricycle riders on this road pay N400 ($3) daily.”

According to the source at the state’s revenue office, “the major fear in permanently stopping the civilian fund collectors is the perceived effect such a policy could have on crime rates. There are fears that if the collectors are stopped, crime rate could escalate.”

Last year, a sweeping state legislation outlawed those that collect levies from transporters, but less than three months after, they reappeared.

What is the origin of the hoard of fund collectors in Lagos? Investigation shows that most of them are either students who dropped out of school or those that missed out on the privilege of being raised in decent homes. They do this “job” just to survive.

Akin, who collects funds at Mobil bus stop, Ikorodu road, says “I was completely jobless when Fashola’s government ordered us off the road last year. I spent most of my time sleeping or watching football matches in the evenings. After sometime, I returned to my spot and started collecting again.”

Asked about who gets the money, he replies in pidgin English, “Oga, I dey work for our big man. I get target, when I don meet that target, the extra is left for me. Whatever happens to what I give to our big man is none of my business.”

It was impossible to get to any of the ‘big men’ for a comment. But it is clear that the collected funds change hands along a chain until everyone involved in the business, directly or indirectly, gets a cut.

But can these collectors be put off the street to be trained and employed in better vocations? Most of the collectors interviewed were hostile and suspicious, but one of the Akin says, “I dropped out of secondary school in JSS3 after my mother died, and have had to struggle on these streets to survival.

“If I am given another opportunity to be trained, I will take it”, the 27-year old said as he displays a pale smile. “I don’t mind becoming a motor mechanic,” he added as his smile broadened.

Seplat sees no oil theft in Nigeria, where Shell lost $1bn

Seplat Petroleum Development Co., the Nigerian oil producer raising $500 million from investors, said it had “absolutely no” theft in Nigeria, where Royal Dutch Shell Plc lost almost $1 billion due to sabotage in 2013, reports Bloomberg.

Seplat in July 2010 bought three licences from Shell onshore Niger Delta, which had been idled for about 18 months, and is bidding for stakes in two more, said A. B. C. Orjiako, Seplat chairman. The company developed the “Seplat model” of engagement with communities by hiring locals to provide services and oilfield security, he said.

“We haven’t employed the thieves and criminals, but we made things difficult for them to operate in the area,” Orjiako said in a phone interview March 11. “Today we are very happy to see that Seplat has absolutely no incidents or disruptions due to community unrest.”

Shell earnings were curbed by almost $1 billion last year in Nigeria because of oil theft and liquefied natural gas export blockade by the government, Simon Henry, chief financial officer, said yesterday. It’s divesting holdings in the country, where it estimates oil valued at about $1 billion is stolen every month.

The thefts by armed gangs operating in the Niger Delta cost the government $7 billion in revenue in 2011, about a quarter of last year’s national budget, according to the Central Bank of Nigeria (CBN).

“Security is a headache on a day-to-day basis,” Henry said. “The theft is very material.”

Seplat, which this week announced plans for an initial public offering in London and Nigeria, pumps about 62,000 barrels a day, almost four times more than when it took over the licences. It relies on Shell infrastructure to export the oil, as do other indigenous companies operating in the country.

As a smaller operation, Lagos-based Seplat has more flexibility to share wealth with local communities, said Orjiako, who started his oil career by trading fuel with Glencore Xstrata plc and Vitol Group about two decades ago.

“Shell is a different kind of animal” and “their footprint is too large in Nigeria,” the Seplat chairman said. “It’s not as easy for them to manage in a nimble way that a company like Seplat would do.”

Shell contributed more than $100 million in community projects, such as agriculture and health care, in the Niger Delta last year, The Hague-based company said. Shell-led ventures contributed more than $700 million to a government educational fund in the five years to 2014.

The Anglo-Dutch company has been operating in Nigeria since 1937, spreading its operations over 20,000 square kilometres with 6,000 kilometres (3,729 miles) of pipelines, according to its website. Its “companies in Nigeria support and finance programmes that address social and economic challenges,” Mutiu Sunmonu, managing director, Shell Nigeria, said February 26.

The oil theft and security issues vary through different areas in the Niger Delta, which is the size of Scotland, Olalekan Akinyanmi, chief executive officer at Lekoil Ltd., said in phone interview. His company so far has only offshore oil fields, where security issues are of less concern, and has been examining plans to bid for licences onshore, he said.

“We know the hot spots” and won’t move into these areas, he said. “You need to add value” to local communities to reduce risk of incidents and “there is no special formula” for doing this.

Culled from Businessday