Nigeria former first lady accuses the government of witch-hunt

Nigeria's ex-First Lady Patience Jonathan has accused the government 's anti-corruption agency of conducting an "unjustified witch-hunt" against her.

The Economic and Financial Crimes Commission (EFCC) was following a "sinister script to embarrass and browbeat" her, she said in a statement.

Last year, the EFCC froze $15m (£11.4m), which the ex-first lady said was to settle medical bills abroad.

Her husband, Goodluck Jonathan, stepped down in 2015 after losing elections.

He was widely praised for being the first incumbent to give up power voluntarily in Nigeria since its independence in 1961.

His successor, Muhammadu Buhari, vowed to tackle corruption in the government.

Mrs Jonathan said that unlike other former first ladies with pet projects seeking to help the less privileged, her NGOs were "being subjected to indefinite probe and microscopic scrutiny by the Buhari administration".

EFCC head Ibrahim Magu had linked her to all sort of "fake possession and properties around the country", it added.

The EFCC has not yet commented on her statement.

Systematically persecuted

Mrs Jonathan's vehicles had been attacked on the road four times since 2015 and the couple's house in Abuja "was vandalised allegedly by security agents sent by government to secure it, and the items stolen are yet to be recovered", said a statement issued by her media aide and published in full by Nigeria's privately owned Vanguard newspaper.

The statement urged President Buhari to order that the harassment should stop.

"We believe that she is being systematically persecuted and punished because of her unflinching support for her husband during the 2015 elections," it said.

In September, the Committee on Public Petitions in the lower parliamentary chamber, the House of Representatives, asked six banks to unfreeze her accounts, saying it had been done without a court order, local media reported at the time.

The EFCC had ordered that the accounts be frozen as it investigated corruption allegations against her.

Mrs Jonathan denies any wrongdoing.

BBC

Central bank of Nigeria printing money to keep government afloat

For a while now, economists and finance types who follow the Central Bank of Nigeria (CBN) have been sounding a low intensity alarm about the CBN’s direct funding of the Nigerian government.

Between December 2013 and April 2017 for instance, the CBN’s “claims on the federal government” went from 678 billion naira to 6.5 trillion naira ($1.8 billion to $17.3 billion)—an almost 10-fold rise. These “claims” are made up of overdrafts, treasury bills, converted bonds and other such lending. For the most part, the issue has remained an obscure one that receives hardly any attention from local media.

But then, a couple of weeks ago, the CBN finally published the personal statements of the Monetary Policy Committee (MPC) members from the July meeting [PDF] and suddenly the alarm bells started ringing. The personal statement of Dr. Doyin Salami, a well-regarded member of the MPC noted for his straight talking, said the CBN was providing a “piggy-bank” service to the federal government. Specifically, he said [page 38]:

Perhaps the most challenging of the present characteristics of the economy in Nigeria is the adoption of a quantitative easing stance by the management of the Central Bank. Monetary data shows a sharp rise in the extent of CBN financing of the government deficit.

He quoted statistics that showed much of the rise in the CBN’s financing of the federal government have come since last December with its purchases of government bonds being the worst culprit with a 20-fold rise in 2017 alone. In effect, the CBN has been printing money to fund the government’s spending. The reason for this is, of course, clear—Nigeria’s government has not been able to recover in any meaningful way from the collapse in oil prices that has now entered its fourth year.

Salami goes on to explain a second order effect of increased government lending. To keep a lid on inflation, the CBN has to balance out the increased government lending with a tightening of the amount of cash banks could lend. It does this by raising the cash reserve ratio (CRR) of banks—effectively taking money out of circulation. Thus, the private sector is “crowded out” for the sake of the government.

That is, the government itself is making it practically impossible for the private sector to pay it the taxes it desperately needs by starving it of the credit it needs to grow. Completing the vicious cycle, the government must then borrow more to fund its spending. A few days ago, it announced plans to raise another $5.5 billion in Eurobondswhich will inevitably raise its debt servicing costs.

A bigger problem with all of this is that it could very well be illegal. The CBN Act of 2007 in section 38(2) says [pdf]:

The total amount of such advances outstanding shall not at any time exceed five per cent of the previous year’s actual revenue of the Federal Government.

One can thus do a quick check to see if the CBN’s lending has broken the law. In the prospectus to the government’s $300 million Diaspora Bond sold in June, it disclosed to the London Stock Exchange that its revenues for 2016 were 5.3 trillion naira [pdf, page 158]. In other words, the CBN could only have legally advanced the government 265 billion naira. The CBN’s figures clearly show it has blown through this limit multiples times over.

But this last week, the CBN governor Godwin Emefiele felt obliged to respond to the controversy, stating “categorically” that the central bank has not over-funded Nigeria’s government. “The government had, on its own, decided that all its funds in banks, both local and foreign currencies, should be moved into the TSA at the CBN,” he said.

Emefiele added: “If a customer of a bank has fixed deposits in an account and needs some spontaneous financing to meet his obligations, his commercial bank can allow him overdraw his account temporarily. That is what is happening.”

Effectively, according to the governor, CBN was lending against the federal government’s deposits in its Treasury Single Account (TSA) with the CBN which currently stand at 5.2 trillion naira. The TSA is a mechanism whereby all cash resources of government ministries, departments and agencies (MDAs) are consolidated in a single account with the CBN. The policy had been half-heartedly implemented for several years but president Buhari finally expanded it to cover the entire government in 2015.

While it will be hard to legally question the CBN Governor’s explanation, it is worth understanding how the TSA works in practice using a personal example.

I recently had to donate to a government owned school in Nigeria for the purchase of some equipment for the students. I asked the school head to send me the school’s bank account details and they replied with a bank account that was clearly the personal bank account of the school’s head. I thought this was a red flag but they then explained why it had to be done that way.

Given that I wanted to make a charitable donation and the school desperately needed the funds, the school head explained that paying it into the school’s official bank account would mean the money was swept by the TSA mechanism to the CBN. The school would then need to go through the considerable bureaucracy of getting the funds back with no guarantee of success. Thus, to avoid this “problem”, they asked that I trust them with the funds by paying it into a private bank account.

This story illustrates the problem with the CBN Governor’s explanation—not all the funds in the TSA belong to the federal government but the CBN has effectively lent against all of it. If I had sent the donation to the school’s official bank account, it would have been counted as part of the balance of funds in the TSA and perhaps the CBN would have increased its funding to the government by a corresponding amount. But the money was only there till the school would have gotten it back for the original purpose for which it was donated.

This is not a distinction that is trivial–many government departments receive foreign funding to carry out projects, for example. The money is swept up into the TSA once received and then drawn down as costs are incurred often several months later. The large TSA balance is thus often subject to sizeable timing differences.

The TSA’s very survival is also threatened by political wrangling every other day. One of the demands by the Academic Staff Union of Universities (ASUU) before calling off their recent strike was for Universities to be excluded from the TSA regime. It was also the main reason they went on a warning strike last year. ASUU are by no means the only ones who are sworn enemies of the TSA. So far, the government has admirably stood its ground and refused to trade away TSA compliance. But as elections approach and various groups begin to make louder demands from a desperate government, it is not inconceivable that the TSA will be the sacrificial lamb that buys the government favors from one of its numerous clients.

These illustrate just how precarious Nigeria’s finances have become. The CBN is lending the federal government huge sums of money based on a suspicious interpretation of its banking mandate all constructed on ephemeral deposits.

Unlike Quantitative Easing by Federal Reserve and Bank of England that came with built-in mechanisms for their eventual unwinding, there is no clear-cut mechanism by which the CBN can roll back the expansion of its balance sheet.

Nigeria’s economy is by no means out of the woods. The government has just not been able to come to terms with the adjustments it needs to make in the face of stubbornly low oil prices. It has tried to soldier on, perhaps hoping that oil prices will rebound soon.

With growth in government revenues that can match the scale of the gap the CBN is currently funding all but impossible, it is time to end this CBN financing of the federal government before it drags the whole economy down with it.

Quartz

Minister of State for Petroleum accuses NNPC boss of insubordination

Minister of State for Petroleum Dr. Ibe Kachikwu has accused the Group Managing Director of the Nigeria National Petroleum Corporation (NNPC) Dr. Maikanti Baru of "insubordination and humiliating conducts" in a letter to President Muhammadu Buhari.

The letter, dated August 30, 2017, was circulated widely in the social media yesterday.

The NNPC had announced major appointments and redeployments on August 29, 2017.

The minister, who chairs the NNPC Board, complained in the letter that the NNPC Board, which by NNPC statutes was meant to review appointments and postings, was never briefed about the appointment or redeployment.

"Members of the board learnt of these appointments from the pages of social media and the press release of NNPC," he said in the letter.

"Like the previous reorganizations and repostings done since Dr.Baru resumed as GMD, I was never given the opportunity before the announcements to discuss these appointments. This is so despite being Minister of State Petroleum and Chairman NNPC Board.

"The Board of NNPC which you appointed and, which has met every month since its inauguration and, which by the statutes of NNPC is meant to review these planned appointments and postings, was never briefed. Members of the Board learnt of these appointments from the pages of social media and the Press Release of NNPC,"Kachikwu said.

The minister said he had decided to bring to the attention of the president after one year of tolerating "these disrespectful and humiliating conducts" from Mr.Baru.

Minister wants NNPC reorganisation suspended

He consequently appealed to the president to approve that the recently announced reorganization in NNPC be suspended.

"My prayers most humbly and respectfully are that you save the office of the minister state from further humiliation and disrespect by compelling all parastatals to submit to oversight regulatory mandate and proper supervision," the letter read.

Mr.Kachikwu said he was constrained to write to President Buhari after failing to secure appointment to see the president "despite very many attempts."


The minister also pleaded with the president to save NNPC and the oil industry from collapse arising from the non-transparent practices of the GMD.

It is a normal correspondence - Ministry

Meanwhile, the Ministry of Petroleum Resources yesterday said the letter was "a normal procedural correspondence by the Minister to the President relating to developments in parastatals under his supervision."

"It is most distressing to the ministry of petroleum resources that a confidential communication to the President on the performance of one of its parastatals can be made public," spokesman for the ministry Idang Alibi said.

"The focus of the communication was on improving efficiency and deepening transparency in the oil and gas sector for continued investor confidence.

"It is noteworthy that the President has been fully supportive of the efforts of the Ministry to entrench good governance and accountability in the oil and gas sector," he added.

Alibi said the ministry remained focused on achieving measurable progress in the implementation of the ongoing oil sector reforms in line with the mandate of the President.

I haven't seen letter - NNPC spokesman

when contacted about the letter yesterday, the Group General Manager, Group Public Affairs Division of the NNPC,NduUghamadu, simply said: "I have not sighted the letter in question neither have I read it... "

He said he wouldn't comment "Until I see such letter."

Between Kachikwu and Baru

There have been little or no clues of a frosty working relationship between the minister and the GMD.

Buhari had in August 2015 appointed Kachikwuas NNPC boss, and named him as Minister in November 2016.

While Kachikwu held sway as NNPC GMD, Baru's name always popped up as his possible replacement.

But in a restructuring exercise at NNPC in March 2016,Mr.Baru was redeployed by Kachikwu from his position then as NNPC's Group Executive Director (Exploration and Production) to the petroleum ministry as Technical Adviser Upstream to the minister.

Baru was however appointed as NNPC GMD on July 4, 2016, while Kachikwu was named as the chairman of the NNPC board.Kachikwu had earlier doubled as minister and NNPC boss.

One of our sources said "Restructuring the NNPC was actually started by Kachikwu when he was the GMD. When Baru came in, he continued with the restructuring but in his own way. The consultants brought in by Kachikwufor the reorganisation exercise were disengaged. I think that was the beginning of the problem between the minister and the GMD."

'They should resolve problem quickly'

A board member of the NNPC, who spoke in confidence, said he was deeply pained that an issue which should have been resolved in camera was thrown to the public galore; thereby subjecting the NNPC to ridicule.

"You cannot rule out scheming in the board of any agency or parastatals and that's exactly what is happening in NNPC. But the most important thing is how the intrigues are managed. It was a serious embarrassment when we read the petition in the social media.

"Of course, all of us in the board are disappointed with the apparent misunderstanding between the minister and the GMD. Yes, there are issues relating to poor communication and consultation.

"But then, these are issues that ought to have been resolved. Remember, we have very prominent people on board, all of them in their own right, including the Chief of Staff to the president.

"Sadly, and for some obvious reasons, the minister ran out of patience and for the fact that he has his ways to the president, he took advantage of that and ensured that his petition was heard.

"We normally meet as at when due; we never missed any of our meetings and even when he was unable to attend for two times because of his tight schedule, the chief of staff had sent his memos.

"This altercation might possibly erode the successes in the oil sector. Remember the crisis we went through when the oil price crashed; but Nigeria was able to find its way at OPEC. At present, fuel price is gradually coming down. I hope this problem would be resolved quickly," he said.

Daily Trust

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