Jun

2

Update to the Blog

Filed Under News, Trade | 2 Comments

I have just added a roll of the allafrica.com feed on trade news to the blog. It is directly below Recent Comments, at the right hand side. I am also currently reading the book The Least Developed Countries and World Trade, a Swedish International Development Agency (Sida) publication. The study was prepared by Stefan de Vylder. I will let you know what I think of it.

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Apr

7

Age Limit for Imported Buses and Trucks

Filed Under Trade | 7 Comments

I just read that the federal government of Nigeria has just decided that buses and trucks imported into Nigeria must not be older than 10 and 15 years respectively. The age limit for imported cars had already been set at 8 years some years ago. In the report - at least the part I read in the newspaper - there was no mention of air pollution. The minister of trade and commerce, Charles Ugwu, said that it was to stop the ‘importation of vehicles that would require excessive maintainance’. Well, the real reason is not really that far-fetched: the announcement was made at a meeting with the local automotive manufacturers/assemblers and major importers/distributors. Remember, Nigeria has a history of import prohibition as a trade policy instrument.

The first thing that came to mind: Tell those importers in Cotonou that business just got better.

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Apr

2

Trying to Understand the Nigerian Oil Industry

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In the closing lines of a post on the Zambian copper industry I wondered whether anyone knew the details of the deals between oil companies and the Nigerian government. A news story I read in BusinessDay rekindled that interest, and a post I read at NigerianCuriosity made me decide to actually blog about it. The news story says that the Nigerian House of Representative found out, during a visit of the House committee on the upstream oil industry to the Department of Petroleum Resources, that the Memorandum of Understanding between Nigeria and major oil companies elapsed in 2003. Shell Petroleum Development Corporation (SPDC) Chevron, Total, Exxon Mobil and Nigeria Agip Oil Company were on the list of companies said to be affected by this. The committee chair, Mr Tam Brisibe, was also quoted to have said that Nigeria signed the MoU with its joint partners in 1986 when it had problems marketing its crude oil. The concern of the committee was that Nigeria might have been cheated of revenues due to it. But I think that the more serious concern should be about how it so happened that the MoU elapsed and nobody noticed.

But then…
…when I googled the only information I got about any MoU was from the Oil and Gas Insights website. The report said that the Nigerian government sought to terminate the MoU that governs the production of onshore oil in Nigeria. The MoU ensured that a minimum profit of $2.50 per barrel was paid to the government, no matter how low the prices of oil get. There was no maximum cap, but future explorations were assured of a tax rate of 65.75%, lower than the 85% for projects that were already in production. Under the Petroleum Profits Tax Act, the tax rate is 85% on all chargeable income; the MoU was supposed to serve as a tax incentive. A letter was written to Shell about this, telling the company that the MoU was going to be replaced with a standard tax plan.

The website also reported that the NNPC said, in January, that it was going to renegotiate the details of its joint ventures, ventures like SPDC in which the NNPC owns 55% and Shell 30%.

So?
So I still don’t understand the structure of the Nigerian oil industry, and it doesn’t seem like the chair of the House committee on the upstream oil industry, Mr Tam Brisibe, does. The fact that these two reports - one from a Nigerian newspaper quoting Mr Brisibe, and another from an industry magazine/website - are conflicting makes it even more confusing. I hope that the investigation of the House committee will help throw some light on the issues, and make the most volatile, but yet most lucrative, industry in the country a little bit more accessible to curious members of the public. I will try to follow the story.

Ref:
Oilandgasinsight
BusinessDay

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Mar

13

The Nigerian Textile Industry and Cheap Chinese Products

Filed Under News, Trade | 18 Comments

I read in BusinessDay yesterday that the investment bank arm of the United Bank of Africa Group has been asked by the federal government to source 70 billion naira through bonds of five year duration (didn’t say exactly which type of bond in the news article). The money is the Textile Development Fund that was first approved by President Obasanjo close to the end of his tenure. It will be given to the Nigerian Export Import Bank (NEXIM) for further lending to the people in the industry.

Mr Jaiyeola Olanrewaju, the Director-General of the Nigerian Textile Manufacturers Association told the Punch Newspapers that the original amount was 50 billion naira, but that the government was convinced that the textile industry needed raw materials so 20 billion naira was added for the cotton industry

What does this mean, really?
Well, we have a history of the use of import prohibition as a trade policy instrument. Just take a look at the list of prohibited items and you will understand what I mean. However, the main complaint made by textile manufacturers is that cheap Chinese products are pricing them out of the market. Most people don’t really know, but the importation of textile products is banned in Nigeria, but most of the textile materials you find in Nigeria are foreign products- the DG of the Nigerian Textile Manufacturers Association says it is 80%; he even goes on to say that 90% of that 80% are Chinese products. It is due to the socio-economic practice formally known as smuggling. I really don’t know what to make of this as yet, but my impression is that there is no way to stop the smuggling of textile products into Nigeria. And this is not because Nigerians love foreign made products - a lot of the cheap Chinese-made textile are of really poor quality so I don’t think it would count in the ‘good foreign products’ book - but because they are cheap and affordable. If the local industry can match the prices of the Chinese made products I am sure that Nigerians will buy them. The other thing is that people want to have the right to choose what they wear, and the imposition of ban on the importation of what would constitute a choice for them would simply not be welcome.

Getting realistic
I understand the point of import prohibition for the protection of the local industry, but at the same time it is apparent that the local industry is so small that it is unable to cater to the needs of the populace. I think that the way to go is to actually accept the fact that the cheap Chinese products are in the market, and that they will remain a viable competition for the local textile industry. This acceptance should be factored into the ongoing restructuring of the textile industry.

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Mar

5

Trade Policies, ECOWAS and Ecobank

Filed Under Trade | 1 Comment

I officially declare my interest in the trade policies of Nigeria and ECOWAS, especially as they concern trade within ECOWAS. This means that I will be having posts on trade on the blog pretty soon. To celebrate my declaration I am drawing attention to a product just newly introduced by Ecobank. The bank has introduced a multi-currency account that can be operated from any of Nigeria, Ghana, Sierra Leone, Liberia, Guinea Bissau, Guinea, Cote d’Ivoire, Cameroun, Burkina Faso, Senegal, Togo, Mali, Niger and Benin. What this means is that one can withdraw money from an Ecobank Nigeria account from say a Liberia Ecobank, in the local currency. Yesterday I drew the attention of one of my friends here in Cotonou to it. When I saw him today he told me that he had gone to reactivate his Ecobank account.

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