ANY one in doubt as to why President Muhammadu Buhari entrusted Mr. Babatunde Fashola, with some of the most important portfolios in his cabinet, should read the keynote speech delivered by the former action governor of Lagos State at the Nigerian Pension Industry Strategy Implementation Roadmap. Appropriately titled: “Overcoming the Challenges and Managing the Risks and Constraints that Inhibit the Investment of Private Capital and Funds in Nigeria’s Infrastructure Landscape in Order to Make a Visible Economic Impact”, Fashola not only identified the issues crippling our development, it also proffered solutions and hope.
He drew attention to the huge accumulation of the Nigerian Pension Fund which can be deployed to the improvement of infrastructure, prisons, education and other sectors. Describing the pension as investible funds, he also recommended that we must ensure that there are enough in-built protection to protect the Nigerian workers who own the funds.
The South African Pension Fund is investing heavily in Nigeria and growing by leaps and bounds. The South Africans have invested in over $897 million in Nigerian economy. Some of the investments include $289 million in Dangote Cement, $98million approved but yet to be drawn for Notore Fertiliser, $230million in MTN Nigeria, $270million in Erin Energy (formerly CAMAC) and $150 million in Mainstream Energy Solutions (in the power sector of Nigeria).
The South Africans see opportunities in Africa’s largest economy. The question is why South Africans should benefit from our economy when the Nigerian workers do not. The answer is straight forward. Let everyone do the right things that will put us on the path of prosperity.
Let us become investment savvy; the days of looting and free money are over. It is time to build our future. And the best place to start is to learn how to promote and support the business sector.
For examples, Brass LNG Limited and OKLNG Limited are two cash cows that can lift the Nigerian economy with ripple effects in many sectors. These projects have been languishing on the drawing board because investor confidence is lacking. We have lost count of the number of times investors in Brass LNG and OK LNG pulled out just about the time for taking Final Investment Decision. Total Oil Company last week pulled out of Brass LNG Limited. Whence cometh the next serious investor? This is sad; but we are the problem. The script they are reading is right in front of our eyes. And its content is not palatable.
The saddest story is the constant harassment of the only Nigerian world class organisation – the Nigeria LNG Limited – by government agencies, the media and NGOs over funds. This company bailed Nigeria and Nigerian worker in times of desperate needs. Now it is facing headwinds in the international market as a result of the low oil price and the sluggish world economy.
The last thing NLNG management requires is the sort of attack a few weeks ago alleging that Nigeria lost revenue because the government provided incentives to the international investors. Nothing could be further from the truth.
The NLNG Act was passed in 1990, amended in 1993 and adopted after exhaustive debates at the National Assembly as an Act of Parliament. It has also been subjected to vigorous legal challenges up to the Supreme Court by NDDC and NIMASA. The government’s wisdom in making this law and providing these incentives, guarantees and assurances is obvious as NLNG has become not only the biggest indigenous company, but by far Nigeria’s most lucrative investment. Nigeria invested about $2.5 billion but has reaped $51 billion, which includes over $15 billion dividends paid to NNPC, over $13b as NNPC’s share from purchase of gas, over $20b local spend on contracts, services, salaries, etc.
It is worth mentioning that Angola, Oman, Malaysia, Qatar and Trinidad granted similar tax incentives. Indeed, Angola granted 12 years tax relief to Angola LNG project. If Nigeria had done the same for Brass LNG and OK LNG, Nigeria (with total production of 22 mtpa) will today be competing with Qatar, Australia, and Algeria. The Nigerian Investment Promotion Commission currently has a list of 71 industries on its website in which pioneers will be granted tax incentives.
The investment decision to build LNG project in Nigeria was taken when the price of oil did not encourage investments.
Tax incentives have become a catalyst for progress. Eleven U.S. state governments each gave away more than $1 billion in commercial tax incentives in 2014 alone. European Union countries gave away more than €23 trillion in tax incentives between 2009 and 2011. Making the United Arab Emirates a tax free country was a deliberate policy and the magnet for international talent and investment. Dubai’s duty-free international airport in 2014 became the busiest airport in the world.
It is a shame that Nigeria LNG Limited, the only mega-project in Nigeria, took 35 years to build. Shame that no other mega project has been done after it. Shame OKLNG and Brass LNG Limited are still languishing.
Samson is a commentator and public affairs analyst based in Lagos.