Thinking

As world leaders gathered at the 80th United Nations General Assembly to deliberate on pressing global issues, this series of reflections explores the common themes that resonated through Africa’s collective voice. In this first instalment, we take a closer look at the shared challenge of conflict across continents, with a particular call for urgent attention to the ongoing crisis in Sudan.

In September, world leaders gathered once again in New York to examine the state of our common humanity and to assess how faithfully we have acted as one another’s keepers. Interestingly, this year’s United Nations General Assembly (UNGA) coincided with the 80th anniversary of the signing of the United Nations Charter, a fitting moment to reflect upon the journey of the past eight decades.

In 1945, fifty nations met in San Francisco to rescue the world from the failures of the League of Nations. Today, one hundred and ninety-three (193) stand as proof that, despite its flaws, the United Nations remains the foremost platform for global cooperation. More than forty (40) African leaders delivered their remarks at the general debate.

Going into this year’s UNGA, four-letter words seemed to hang heavily over the Assembly: G-A-Z-A. The conflict between Israel and Palestine dominated the discussion and stirred deep emotion. Yet, beyond the tragedy in Gaza, there were deeper and more enduring questions that African leaders sought to pose to the world: the question of equity in global governance, the question of justice in the economic order, and the question of pushing peace to be a far-reaching one.

This series of reflections examines the common themes that echoed through Africa’s voice at the 80th UNGA. In the first instalment of this series, we examine the issue of common conflict.

What is good for (the) Gaza is good for (the) Sudan

When the League of Nations failed, it was not for lack of words, but for lack of will. It watched aggression grow, and by its indecisiveness and inaction, gave it strength. Out of that failure came the United Nations, a creation born from the ashes of war and the promise of never repeating the same mistakes.

Today, it seems like the UN is making the same mistakes, and there is a growing consensus, as President Ruto of Kenya succinctly puts it, that too often, the UN’s Blue Helmet, once a symbol of moral authority, no longer commands the same respect.

You see, the League of Nations fell because when an international crisis loomed, the inherent weaknesses of the League were cruelly exposed.

Today, there are a growing number of global crises; amongst many, one very prominent topic at the UNGA that crossed across member states was the situation in Gaza.

Every state present was vocal about this, and African leaders weren't an exception.

Like most countries present, the popular demand was the unconditional release of Israeli hostages, a permanent ceasefire in line with humanitarian law and a two-state solution, on the basis that Palestinians deserve a peaceful state alongside a peaceful Israel. Both for Palestine and Israel, on the basis that this reflects the determination of the global majority, the implementation and rebuilding is expected to be worked out in the coming days, months and years.

What is Africa’s position on Gaza, and what have we done?

As a background, out of 54 African states in the UN, 52 have already given full recognition to Palestine, and just two, Cameroon and Eritrea, have failed to recognise the Palestinian state. Israel sees Cameroon as one of its key allies, and Eritrea is not opposed to Palestine in principle, but due to economic reasons, they have not formally recognised the Palestinian state.

At the UNGA, African leaders were vocal about Palestine, but beyond fancy rhetoric, Africa had indeed played its part on the path to peace in Gaza “As Palestinians continue to face genocide and famine, we have a duty to act”. These were the words of the President of South Africa, Cyril Ramaphosa. South Africa has indeed acted: readers will recall that after nearly three months of relentless Israeli bombardment, which killed more than 21,500 people and caused widespread destruction in Gaza, South Africa, remarkably, was the first to file a case before the International Court of Justice (ICJ).

At the time South Africa filed this case, many nations had openly been playing hide and seek with words. In its application to the court, South Africa described Israel’s actions in Gaza as “genocidal in character because they are intended to bring about the destruction of a substantial part of the Palestinian national, racial and ethnical group”.

However, the ICJ did not determine the merits of South Africa’s allegations; rather, in its directive ruling in January 2024, the court found it “plausible” that Israel was violating the Genocide Convention and ordered Israel to “take all measures to prevent” genocide. Later, in March 2024, following more prompting by South Africa, the ICJ ordered Israel to ensure that food entered Gaza in the face of famine and in May 2024, the court issued a third order requiring Israel to halt attacks on Rafah, where hundreds of thousands of Palestinians were sheltering at the time.

Even with a peace plan now on the table, South Africa has maintained its resolve to pursue the case. This determination, however, has strained its relationship with Israel’s key ally, the United States. In August, Washington imposed steep 30 per cent tariffs on South African exports, citing Pretoria’s case against Israel at the ICJ as one of the reasons for the decision.

Earlier in the year, Nigeria played a crucial diplomatic role in facilitating the evacuation of infants from Gaza to hospitals in Jordan, Egypt, and the UAE for urgent medical care after being approached by the Red Cross for assistance.

Arab states have also endorsed Egypt’s Gaza Reconstruction Plan, presenting a potential pathway toward rebuilding the war-torn enclave. Ghana dispatched emergency humanitarian aid to the Palestinian people amid the escalating humanitarian crisis in the Gaza Strip.

What about Sudan?

As the world debates Gaza in unison, another crisis rages in Sudan. Since April 15, 2023, Sudan has been engulfed in a brutal civil war between the Sudanese Armed Forces (SAF) and the paramilitary Rapid Support Forces (RSF). The conflict erupted when the RSF’s demand for immediate integration into the national army clashed with the SAF’s preference for a gradual process, exposing deeper rifts in vision, ideology, and allegiance; a reflection of the deep mistrust and power struggle that has plagued Sudan since the dust began to settle on the 2021 military coup.

The result has been catastrophic: over 150,000 lives lost, millions displaced, towns reduced to rubble, and famine stalking the land. Humanitarian corridors have collapsed, and both warring parties have weaponised starvation.

While the situation in Gaza has taken centre stage, it is indeed concerning that what has now become the world’s largest displacement crisis continues to attract such limited international urgency. Before proceeding further, it is important to clarify that this is not an attempt to compare the conflict in Gaza to that in Sudan. Wars are not academic exercises; they are lived tragedies where human lives, homes, and futures are at stake. Rather, this reflection seeks to draw attention to Sudan, a crisis that erupted nearly six months before the escalation in Gaza, yet has received a fraction of the global attention.

The Director-General of the World Health Organisation (WHO) also shared this concern when he lamented that global attention to Sudan remains “really low,” adding candidly that “race is a factor.” His remark compels both moral and analytical reflection. Is race, in fact, a determinant of global urgency? Whether one accepts or disputes this, the statement exposes an uncomfortable truth: the value of human suffering still appears unevenly measured in the court of global conscience, where geography and complexion too often influence the world’s response to tragedy. The hierarchy of human suffering persists, shaped by geopolitics, media focus, and historical bias.

For international institutions, this is not merely a moral dilemma but a structural one. The uneven distribution of global attention to Sudan affects how resources are mobilised, how urgency is defined, and, ultimately, whose lives are deemed worthy of rescue.

At the UNGA, some African leaders used the time to draw attention to the situation in Sudan during their addresses. President William Ruto of Kenya expressed deep concern over the worsening humanitarian situation, emphasising that “innocent citizens are caught in the crossfire of a needless war.” Kenya also reiterated its full support for the Quad joint press statement after they met in September, comprising Egypt, Saudi Arabia, the United Arab Emirates, and the United States, in affirming that there can be no military solution to the conflict, only a political one.

Echoing these sentiments, President William Ruto urged all actors, internal and external, to respect Sudan’s sovereignty, unity, and territorial integrity, and to reject any attempts to fragment the nation. His words were not only a diplomatic appeal but a reminder that the integrity of Sudan holds symbolic weight for the entire continent: a test of whether Africa can resolve its conflicts through cooperation rather than coercion.

Ghana’s president, John Mahama, also highlighted the situation in Sudan and how it is consequently building up a migrant crisis.

Meanwhile, the humanitarian crisis continues to deepen. Some African countries have indeed shown up; many are still missing in action. Sudan’s neighbours, bound by geography and shared history, have shown quiet leadership where the world has shown fatigue. South Sudan, itself no stranger to displacement, has opened its doors to those fleeing the conflict, providing plots of land for cultivation and integrating families into local communities. At the UNGA, its government has also reaffirmed its commitment to working with Sudan to resolve border disputes in line with the 2005 Peace Agreement; a gesture that exemplifies regional solidarity in the face of global neglect.

Egypt now hosts the largest number of Sudanese refugees, with over 1.2 million arrivals since April 2023, while Ethiopia and Chad continue to absorb hundreds of thousands more with limited resources and fragile economies. The strain has been particularly severe in Chad, where inflation and rising commodity prices, up by nearly 70 per cent, reflect the economic aftershocks of the Sudanese conflict. Landlocked and dependent on Sudan for trade, Chad has turned increasingly toward Nigeria and other regional partners for alternative supply routes.

Surprisingly, Nigeria, which is usually vocal in regional peacekeeping efforts, beyond evacuating its nationals, has shown little diplomatic leadership on Sudan despite direct pleas from the Sudanese mission to intervene. For a country that aspires to global and continental leadership, and made it clear in its remarks at the UNGA that it deserves a seat at the UN Security Council, its absence is as loud as it is regrettable. If Nigeria, once the moral compass of the continent, now watches crises unfold in silence, what message does that send about Africa’s readiness to shape its own peace?

Taken together, these efforts illustrate a pattern of regional resilience but also expose a sobering truth: the world and Africa have not done enough. While some of Africa’s responses, though rooted in solidarity, remain constrained by limited capacity and inconsistent coordination, without stronger multilateral support, Sudan’s neighbours risk becoming casualties of a crisis they did not create.

To move from compassion to coordination, Africa’s response to the Sudan crisis must evolve beyond fragmented national gestures toward a functional and collective regional framework. It is imperative that the African Union, working with the Intergovernmental Authority on Development (IGAD) and the United Nations, should establish a joint humanitarian and political task force mandated to (1) streamline aid delivery through coordinated border management, (2) mediate sustained ceasefire negotiations between the SAF and RSF, and (3) design a continental refugee response strategy that shares the burden equitably among neighbouring states.

Such a mechanism would not only reinforce Africa’s commitment to “African solutions to African problems,” but also restore confidence in the continent’s capacity for leadership in peace and security, which is central to the African Union’s founding vision.

Overall, Sudan’s tragedy, however, is not one of silence but of selective hearing. It is acknowledged that international diplomacy is complex and resource allocation takes time; however, until the world begins to respond to human suffering with equal urgency, irrespective of geography or complexion, the ideals enshrined in the UN Charter will remain aspirational rather than actual.

Author

Bolaji Ogalu / Chief Analyst, Governance and Institutions | b.o@borg.re

The Nigeria Tax Reform Bills And The VAT Revenue Distribution Conundrum

2025-02-07T15:53:59+00:00

Fiscal Policy

The Tinubu-led administration has introduced comprehensive reforms to overhaul Nigeria's tax system. However, one major point of contention is the proposed revenue-sharing formula for Value Added Tax (VAT) collection, which has sparked significant debate. This article explores the concerns raised by stakeholders and advocates for a balanced compromise to address these issues.

The Tinubu-led administration has unveiled a turning point in the Nigerian tax system with the introduction of the Nigeria Tax Reform Bills (the Bills). The proposed four-pronged legislation comprises the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill and the Nigeria Joint Revenue Board (Establishment) Bill. Altogether, they seek to effect a flurry of landmark changes aimed at transforming tax administration, alleviating the tax burden on the population, and encouraging growth and innovation among businesses. Many of the intended changes have been met with growing applause and appreciation but the revision of the revenue-sharing formula for Value Added Tax remains a bone of contention.

It sparked widespread controversy among Northern leaders, key stakeholders, and the general populace, with some South West and Eastern states expressing reservations. The lingering dissent is anchored on the perceived disadvantage that the new formula could potentially occasion for less-industrialised Northern states with minimal economic activity. Oppositions to the Bills have necessitated strategic consultations in a bid to make clarifications and reach compromises that will allow the successful passage of the Bills into law.

Key Changes And Impact

The purported reforms are long overdue and necessary to address bottlenecks that have for many years impeded tax administration and compliance in Nigeria — the major one being the multiplicity of taxes.

Currently, Nigeria’s tax legislative framework is made up of several disjointed laws scattered across different statutes, with several conflicting provisions. The Bills aim to eliminate obsolete laws, erase conflicts, and consolidate relevant statutes into a single piece of legislation, thus streamlining tax compliance and administration processes. To this end, the Nigeria Tax Bill specifically repeals 11 tax statutes, amends 13 other tax laws, and modifies two subsidiary legislations. A new, single tax code — the Nigerian Tax Act — will emerge and exist as the major point of reference for everything tax in Nigeria. This framework aligns with international best practices.

Important changes are also intended for Nigeria’s Personal Income Tax (PIT), Companies Income Tax (CIT), and Value Added Tax (VAT) landscape. Currently, individuals earning N300,000 annually (less than minimum wage) pay PIT. To alleviate the pain of low-income earners — especially in light of the current economic context characterised by dwindling purchasing power and increased cost of living — the Bill increases the exemption threshold. Only persons with an annual income exceeding N800,000 will be subject to PIT. A progressive rate is maintained, as high-income earners are subject to higher PIT rates.

The CIT exemption threshold for small businesses will be increased, rising from N25 million annually to N50 million. This expansion allows for a larger pool of small businesses to enjoy tax-free operations, creating more room for growth. Large corporations are not left out. The CIT rate for large companies is expected to decrease from 30% to 27.5% in 2025, then 25% in 2026. And when companies declare loss rather than profit, they cease to be obligated to pay a 1% minimum tax. Topping it all, allowable deductions from gross earnings have been expanded, enabling companies to reduce their taxable income.

Under the current tax regime, companies pay various levies at varying rates in addition to CIT, including the Tertiary Education Tax, National Agency for Science and Engineering Levy, and National Information Technology Development Levy. These multiple levies can be frustrating for companies. Thankfully, the Bills provide a solution by harmonising them into a single levy called the Development Levy at the rate of 4%. By 2030, this rate will reduce to 2%.

Another key change is the proposed increase of VAT from 7.5% to 10%, rising to 15% by 2030. Meanwhile, essential goods and services such as food, education, and healthcare, will remain VAT-exempt, continuing the existing regime. The Nigerian Revenue Service replaces the Federal Inland Revenue Service (FIRS) as the central revenue authority for the federation with a broader administrative role. Similarly, the Joint Revenue Board will displace the deficient Joint Tax Board. A Tax Ombudsman will also be established to address taxpayer complaints regarding the Board’s operations.

VAT Revenue Distribution Under The Tax Reform Bills

It is no surprise that there is much fuss about the proposed change to the VAT-sharing formula. The Federal Government collects VAT but distributes 85% across states and local governments. With the passage of the Bills, this figure is expected to increase to 90% as more allocation is going to states. Of course, states are satisfied with the new figure, the problem lies in how it is expected to be shared among them.

The present sharing formula is as follows: 20% is allocated based on derivation (disbursed according to states' VAT contribution), 50% on equality (shared equally among states), and 30% on population (states with larger populations get a larger cut). A new formula is proposed in the Bills: 60% derivation, 50% equality, and 30% population. Beyond the figures, the derivation model is modified.

Derivation is redesigned to favour the location where the goods and services were consumed rather than where the VAT is remitted, as is the extant case. This revision addresses imbalances and unfairness plaguing the current framework, ultimately promoting national unity and engendering fiscal equity.

Under the current model, states with a high concentration of company headquarters contribute more to the national VAT pool because companies typically remit VAT to the government where their headquarters are located. This approach overlooks other parts of the country where the goods and services were sold, depriving those states of recognition for economic activity in their regions. As a result, a few states disproportionately benefit from VAT returns and receive the majority of the revenue distributed based on derivation. For example, Lagos, Rivers, and Abuja, which receive 42%, 16%, and 9% of the national VAT revenue, respectively.

In contrast, states like Borno and Bauchi, despite their large population, collect less than 0.5% due to fewer number of company headquarters in their respective states

In the proposed system, VAT returns will be attributed to where goods and services were supplied and consumed, preventing companies from redirecting VAT proceeds to their headquarters. With the increased 60% derivation allocation, more states will benefit from a larger share of the VAT generated within their borders. This change is expected to boost revenue for states that were previously sidelined.

The irony is that the states purported to benefit from this revised model were the ones championing the opposition to the Bills. Their primary reservation is that the new derivation framework is disproportionally favoured to the south, thus leaving them at a disadvantage. According to the critics, most of the consumption occurs in the South. Consequently, the South will enjoy the greater chunk of the VAT revenue, worsening economic disparities between the South and North. Meanwhile, the Bill’s supporters have suggested the Northern leaders inadvertently conjured a misconstrued view of the Bill’s provision or the oppositions were merely political antics aimed at negotiating political interests.

However, opposition seems to be dwindling as the Fiscal Policy and Tax Reforms Committee (the Committee) pioneering the Bills, is tirelessly working to dispel the growing concern about its perceived disadvantage to Northern states.

Following consultations and stakeholder engagements, a breakthrough emerged when the Nigerian Governors Forum (NGF) endorsed the Bills however with crucial recommendations for its amendments. The Forum suggested a revision to the sharing formula, requesting that 30%, as opposed to 60%, be allocated based on derivation, with 20% and 50% for population and equality respectively.

Going Forward

It is accepted that a compromise must be reached for the Bills to progress. Nonetheless, the Committee and the lawmakers should strike a balance between reaching a compromise and protecting the original purpose of the initially proposed changes. The NGF-recommended 30% is considerably low and may make little difference in the long run. Besides ensuring equitable distribution of resources, a major intent of the initial 60% and revised derivation model is to encourage states to take the initiative of developing production and economic activities within their regions, thereby increasing their internally generated revenue and reducing reliance on federal allocations for sustainability.

Admittedly, it may be overly optimistic to assume that a change in the law is the single magic wand that would render these states economically viable — infrastructural deficits, insecurity, and poor governance remain underlying issues. However, it is arguably a step in the right direction, with potentially long-term benefits. Complementary efforts such as strategic investments, infrastructural development, and good governance must be encouraged to cushion the impact of the revised policy in the short term.

Moreover, Nigerian leaders’ disposition towards revenue generation needs a paradigm shift: many states need to switch from being consumption-focused to production-based. The “give-me give-me” approach is unsustainable. Untapped potential and resources exist in several regions because those at the helm of affairs have failed to utilise them to promote economic advancement. Therefore, increasing the percentage of VAT proceeds states get to retain for themselves could potentially encourage domestic production, incentivise states to implement policies to stimulate economic activities and attract private-sector investments. All of these would result in an enlargement of government coffers in undeveloped states, improving the overall welfare of its people.

Another concern is the position of states on monopolising VAT administration within their regions. Prominent states like Lagos and Rivers, which generate large amounts of VAT, have explored judicial means of achieving exclusive control of VAT. A case in point is the extant suit between Rivers State and the FIRS currently on appeal at the Court of Appeal following the Federal High Court’s decision which affirmed that states have the exclusive constitutional right to administer VAT within their regions. The increased derivation percentage is a subtle means of settling the score between these agitated states and the federal government. The idea is that if states can retain more of the VAT proceeds remitted by them, they might refrain from seeking full control of their VAT. If lawmakers proceed with the recommended 30%, this discontent among these states may linger, threatening the Federal Government’s powers.

In reaching a middle ground, the Committee and lawmakers should consider pegging the derivation quota at 40%, allocating 40% to equality, and 20% to population. This maintains a balance that addresses the concern of unfair distribution, dissuades the agitation for exclusive control, and most importantly, encourages states to stimulate economic activity in their regions.

Author

Olayinka Shado / Research Analyst, Fiscal Policy / o.s@borg.re

A Foreign Policy Roadmap for the Bola Ahmed Tinubu Presidency: Key Strategies for Renewed Alliances.

2024-12-20T17:12:37+00:00

Under the Tinubu administration, Nigeria’s foreign policy faces a mix of challenges and opportunities. From diplomatic reforms to regional stability, this article examines four actionable strategies to reposition Nigeria as a leader in Africa and a key player on the global stage.

Nigeria is currently at an important juncture in its political and economic history. With an estimated population of over 200 million, it stands as the most populous African nation, doubling as its largest democracy. Since independence in 1960, Nigeria has been positioned and near-destined to have a consequential effect in its affairs which would ripple through the entire African continent. Simply put, Nigeria is too big to ignore, in the African discourse. Foreign Policy is the conduct of a state’s affairs abroad, essentially how a nation plans to affect friendly relations among nations.

With the Bola Tinubu Presidency now past its first anniversary, there are pertinent issues on diplomacy and foreign policy do not seem to have been given much-needed priority. While the appointment of Ambassador Yusuf Maitama Tuggar, the former Nigerian Ambassador to Germany, as the Minister of Foreign Affairs, is a much welcome development, the usual delay in the appointment of ambassadors with their respective portfolios dampened any potential buzz as to the foreign policy direction of the Bola Tinubu Presidency.

Nevertheless, attracting Foreign Direct Investment (FDI) is a core part of the Bola Tinubu Presidency especially as the government seeks to encourage the growth of the non-oil sectors and provide much-needed infrastructure in the construction and petroleum sectors. Priority must be given to a total rebranding of Nigeria’s foreign affairs if there would be any feasible hope of making headway through investments. A rebrand of foreign policy would reposition Nigeria as the country of choice for investments in Sub-Saharan Africa, create new alliances and trading partners, boost the nation’s image in Africa and beyond, and finally, gain some bonus points by increasing the strength of the Nigerian Passport.

Nigeria had previously boasted of competent leaders and career diplomats who filled the ranks in the foreign ministry and also in international organisations. Names such as Jaja Wachukwu, (Former Nigerian Ambassador to the United Nations and Nigeria’s first foreign minister), Chief Emeka Anyaoku (Former Secretary of the Commonwealth of Nations), Dr Uzoma Emenike, a career diplomat and author, who has served as the Former Ambassador to Iceland, Ireland and currently serves as the first Nigerian female ambassador to the United States, and Ngozi Okonjo Iweala former finance and foreign minister, and Current DG of the World Trade Organization to mention a few.

This essay will focus on five key strategies necessary for an effective foreign policy in line with Nigeria’s current political and economic realities.

Strategy One: Round Pegs in Round Holes - Appointment of Ambassadors Must Favour Career Diplomats as A Matter of Priority, Over Rewarding Political Alliances.

With the tide of global politics changing, it is evident that key outposts would cover the United States, China, The United Kingdom and the United Nations. Additionally, to bolster the international image there is a growing need to increase the number of diplomatic outposts; to forge new alliances. The United States and China are the global superpowers not just out of military and economic might, but because of their sheer reach globally. The US and China are the two nations in the world with the most diplomatic representation, with a whopping 273 diplomatic representations for the US and 276 diplomatic representations for China (including embassies, consulates etc)

However, to simply encourage the Bola Tinubu Presidency to open up more embassies globally without the attendant qualified personnel to take charge would be counter-intuitive, to say the least. The appointment of ambassadors must be given serious thought, and must consist of a meritocracy-based rigorous selection process, a shared responsibility based on the foreign minister’s recommendation, the National Assembly’s vetting and the Presidential seal of approval.

Diplomatic experience must be among the top criteria for appointing ambassadors, not the rewarding of political alliances or allies. A diplomat tasked with representing the nation abroad must have the necessary background and training to equip them with the necessary tools for success- negotiation, tact, language skills, critical thinking, with a commanding knowledge of geography, history, and global affairs are the barest minimum. Consequently, this role might not necessarily be well suited for a career politician, with minimal exposure to multilateral engagements and little diplomatic training. While a cautious approach should be taken in opening new diplomatic missions in other countries, the guiding principle should be the type of relationship which Nigeria seeks to build with the host nation. For example, due to limited resources amongst other considerations, Nigeria currently maintains only one embassy for the whole of Scandinavia (The nations of Denmark, Sweden and Norway), located in Stockholm, Sweden.

The embassy serves as a central location for diplomatic duties with other Scandinavian/Nordic neighbours – Norway, Finland and Denmark. Opening an embassy in these three nations would signal an intention to streamline bilateral duties and possibly collaborate through trade or meaningful exchange programs. The numbers are currently poor with diplomatic representation as there are only twenty-four (24) Nigerian diplomatic representations across Europe. A change is needed in ambassadorial appointments, however, this would only yield positive fruits when we have round pegs in round holes representing our interests in these nations.

Strategy Two: ECOWAS As a Catalyst for Regional Peace and Stability to Support Failing Democracies in West Africa:

If a policy report were written on the state of democracy in West Africa in the past four years alone, it would show an almost endless domino effect of coups and counter-coups. The nations of Guinea, Guinea-Bissau, Mali, Niger, and Burkina-Faso have all experienced coups in West Africa since 2020. Trends in keeping with this dilemma have already taken a foothold in the Central African nation of Gabon.

The Bola Tinubu Presidency is presented with a unique opportunity. Following the election during the committee of head of states meeting of ECOWAS in October 2023, President Bola Tinubu was elected as the Chair of the regional economic bloc. With the recent coup in Niger on November 2023, ousting the elected President Bazoum, ECOWAS threatened the use of force and military intervention issuing an ultimatum for the subsequent release of the captured President Bazoum. This ultimatum ultimately ignored by the Nigerien military Junta has in simple terms worsened relations between Nigeria, Niger and the ECOWAS bloc. It has pushed the Nigerien Junta farther away from the negotiation table and in retaliation, the Nigerien Junta has instituted a “No-fly” zone on aircraft from Nigeria. Burkina-Faso, Niger and Mali, abruptly left ECOWAS issuing a communique on the reason for this decision, which served as a backdrop for signing a military pact with the objective of collective security in case of armed hostilities between ECOWAS and any of the signatories to the pact.

With all this tension, the puzzling question would be, where does the opportunity in all this chaos lie? The events in Niger, Mali and Burkina-Faso need more of a “carrot than a stick” approach. It would be a mistake to adopt the peacekeeping strategies which saw success in the mid and late nineties in Sierra Leone and Liberia. The Bola Tinubu Presidency wielding the mantle of regional leadership in ECOWAS must adopt tact and diplomacy. ECOWAS must seek consensus amongst its member states to return the nations of Mali, Niger and Burkina Faso to the negotiation table with a progressive and realistic date for the gradual return of democracy in these nations.

A tiered structure with incentives and rewards would dissuade tensions and keep hostilities at a bare minimum. Sanctions while attempting to impose conform obedience should only be used as a last resort. This is because sanctions when not carefully imposed do more harm than good, increasing poverty amongst the populace, and destabilizing the economy without achieving the desired outcome. This would be counter-intuitive. However, a more targeted sanctions regime including travel bans on the junta and their leaders, and freezing of international bank accounts, in this unique case, all three nations are landlocked nations and limiting their access to sea through increased tariffs etc. could help put the necessary but specific pressure on the leaders of the junta. In combination with a tiered structure of reward and incentives, this approach would encourage dialogue while showing a roadmap workable to the return of democracy- with the highest tier level being the conduct of credible elections and the eventual swearing-in of new leaders.

Strategy Three: Exploration of New Alliances & Relations: BRICS+ & a Strengthened G20-Nigeria Partnership:

BRICS: BRICS is poised as the polar counterbalance to the Group of 7. The nations of Brazil, Russia, India, China and South Africa have positioned themselves to be the voice of the global south, demanding economic and political equality in relations between member states. In January 2024, Egypt, Ethiopia, Iran, and the United Arab Emirates (UAE) were all admitted as new members of BRICS. This presents a unique opportunity for Nigeria. The foreign minister, Amb. Yusuf Maitama Tuggar has declared Nigeria’s interest in joining the organization in a March 2024 visit to Russia to meet with Sergey Lavrov, his Russian counterpart. The Nigerian economy is in dire straits.

The 2024 IMF projections on Africa’s economy show that the nation has lost its place as Africa’s largest economy to South Africa, sliding down to a remarkable fourth place behind Morocco, Egypt, and South Africa. This makes it hard to make any case for attracting foreign investors especially as there is a concerted effort for the diversification of Nigeria’s economy away from oil and gas exports.

BRICS could be an economic lever for Nigeria should she become a member. One of the key priorities of the Bola Tinubu Administration is the attraction of foreign direct investment alongside investment in infrastructure for an economy hit with double-figure inflation. A BRICS membership could present a new opportunity and platform for new economic partnerships for Nigeria. Multilateralism would open doors to a synergy with other nations on projects and infrastructure; doors which would have been more difficult to access in bilateral relations due to more stringent preconditions.

There is potential for African nations to play a leading role in BRICS affairs, especially with South Africa as a key founding member and the admission of other regional powerhouses into the organization. With the new possibilities in trade and economic alliances BRICS could offer, the Tinubu Administration must consider and evaluate the long-term mutual benefits of membership.

Strengthened Partnership between Nigeria and The Group of 20. (G20): Globally renowned economist, Prof. Jeffrey Sachs has referred to the G7 as unrepresentative of today’s global economy following the group’s Cornwall Summit in 2021. In his essay, We Don’t Need the G7, Sachs highlights that in 1980, the G7 members made up about 51% of the world GDP whereas the developing countries of Asia accounted for just 8.8%. These numbers are quite different today. The point is that this is not 1980 anymore. As of 2021, the G7 countries produce a mere 31% of global GDP while the previously developing nation of Asia makes up nearly 33% of global GDP.

The current setting of the G-20 harbors large developing nations including China, India and Indonesia seeking to balance the interests of developing and high-income nations. Now with the confirmation of the African Union, an African seat at the G-20 table shows an intention of the G-20 to engage positively with the continent. In a May 2024 visit of the foreign minister, Yusuf Tuggar to the United States, in an interview with MSNBC, the foreign minister discussed Nigeria’s aspirations for a permanent membership of the G-20, highlighting Nigeria’s regional historic importance in West Africa and the African continent. Unfortunately, such narratives were hedged on a Nigeria that no longer exists- a far cry from the ECOMOG-peacekeeping, and Anti-Apartheid foreign policy objectives of the late 1980’s to the late 1990s. A claim to global importance on account of Nigeria’s historical continental leadership is still shaky. Something buoyed by demographics and not economics.

A potential G-20 membership not hinged on the AU Chair at the table would prove a difficult task. Like a kid asking to go outside to play without doing their homework. The membership of the G-20 could be said to be hinged on the keywords, “Major Economies”. There must be a national emergency which must be called by the administration to address the dual dilemmas of economic rebuilding and security before any thought can be given to a potential G-20 membership if necessary. A transparent roadmap with rigorous evaluation translates to certainty for investors that the right team is at the economic wheel of the nation.

Strategy Four: Progressive Implementation of the African Continental Free Trade Agreement:

The Nigerian passport is ranked 86th globally on passport power rank and 48th in Africa. The African Continental Free Trade Agreement (AfCFTA) is a continental framework aimed at creating a single African market for the free movement of goods and people and eliminating tariff and non-tariff barriers to trade.

While there has been incremental progress in stage one of the AfCFTA implementation, the macro score sheet for continental-wide implementation is still very low. The reasons for this are not identical however they show the lack of infrastructural capacity and gap in the African payments system. Nigeria can play a leading role in two major areas:

Finance (Payments Platforms): The Pan-African Payment and Settlement System (PAPSS) was launched in 2023 to simplify intra-African payments for goods and services. Pioneered by the Africa Import Export Bank (Afrexim Bank), the system is a -platform where African customers patronising businesses in Africa can pay for transactions either for goods or services in their local currency, with the seller receiving the market rate local equivalent of the amount paid. The use of the system is tied to traditional banks across Africa and depending on the country where PAPPS is available, it can be used either by a mobile phone or a walk-in to the bank. This is an exciting development although as of March 2024, PAPPS is only available in seven African countries (including Nigeria).

Due to the size and presence of Nigerian Banks across Africa the PAPSS system has been made available through these institutions, the Tinubu Administration can encourage the widespread adaptation of PAPPS in countries where Nigerian Banks have a strong hold by incentivising the initiative either through tax rebates or by offering financial subsidies or grants to banks for the initial integration costs with PAPSS.

Transport Systems: Goods and people can only move freely where there are good road and rail networks, as they are usually the most affordable means of transportation within the continent. The Trans-Saharan highway runs from Algiers, Algeria, to Lagos, Nigeria connecting six countries across North and West Africa. It is a laudable yet uncompleted project as at June 2024. The AfCFTA implementation could be catalysed by the ensuing economic regional integration that would be birthed from the completion of the highway.

The Tinubu Administration should seek to foster regional collaboration for the project’s competition working closely with partner countries (Niger, Chad, Mali, Tunisia and Algeria) to coordinate investments and infrastructure efforts. Financing opportunities should be given to international and local partners to come and fund specific phases of the project or international development assistance can be procured either through the World Bank or other willing development finance organizations.

Conclusion

In his MSNBC interview, the foreign minister, Yusuf Tuggar discussed the new “4D Policy”, a comprehensive approach which outlines Nigeria's priorities in global engagements under the Tinubu Presidency—the four D’s compromises of Democracy, Demography, Development and Diaspora. With a shrinking economy and the exodus of oil majors and other companies, there is a lot of work to be done to re-invent Nigeria’s image internationally. Time will tell.

However, there must be a concerted effort to do the basic things right, starting from low-hanging fruits and pursuing long-term economic goals with a proven trickle-down effect. Nigeria’s economic and diplomatic success would have positive outcomes for the West African Sub-region and the continent at large. While Nigeria looks to exert its influence and achieve its foreign policy objectives, we must review unique models on the continent in line with democracy and development, adapting with context and preparing for the next important decades for the African continent.

Author

Daberechi Ogbuishi / Policy Analyst / Contact

Nigeria’s Value Added Tax at 30: Yesterday, Today and Tomorrow

2024-06-07T13:14:08+00:00

White Paper

Executive Summary

This year made it thirty years since Nigeria began administering the Value Added Tax (VAT). Thirty years in, the VAT has been a constant source of challenge to Nigeria’s federal fiscal structure and has earned the reputation for being Nigeria’s most controversial tax.

This year made it thirty years since Nigeria began administering the Value Added Tax (VAT). Thirty years in, the VAT has been a constant source of challenge to Nigeria’s federal fiscal structure and has earned the reputation for being Nigeria’s most controversial tax.

Notwithstanding, the VAT has continued to evolve over the past three decades and we daresay it may have reached its watershed moment. A plethora of reasons account for this state of affairs.

First, despite contributing significantly to the nation’s fiscus, questions about increasing the VAT rate and partnering with market trader associations to bring informal sector traders into the tax net have arisen amidst the general concerns about Nigeria’s tax-to-GDP ratio being one of the lowest in the world.

Second, equity considerations about the allocation of a fair share of VAT revenue to the states where a large percentage of the VAT revenues are generated have also resurfaced in recent times.

Third, the suitability of the VAT and indirect taxes to ensure the optimal taxation of the digital economy is being considered by countries, scholars, and policymakers against the backdrop of the global tax reform efforts of the Organisation for Economic Co-operation and Development (OECD) and the United Nations (UN).

Fourth, the emergence of continent-wide trade multilateralism in Africa—through the African Continental Free Trade Agreement (AfCFTA)—has raised concerns about the possibility of VAT harmonisation in Africa and the integration of regional VAT frameworks like the ECOWAS VAT Directive into a possible harmonised continental VAT framework (to ease VAT compliance and protect indirect tax revenues in the single African economy).

All of these problems and concerns with the VAT regime have taken center stage in policy discussions about the VAT at a time when the government of President Bola Ahmed Tinubu has established the Presidential Fiscal Policy and Tax Reforms Committee to undertake a comprehensive review of Nigeria’s tax laws and policies.

The Committee has identified some of these problems and appears to be working towards resolving some (if not all of them). Therefore, in light of the significance of these problems and the current administration’s resolve to fix the tax system; this is as good a time as any to expect the emergence of a modern, equitable, and world-class VAT system that delivers economic growth and development for the Nigerian people.

In this study, we reflect on the development of Nigeria’s VAT, monitor and assess the current legislative and policy framework for the administration of the VAT, and make policy projections for the optimal administration of the VAT in Nigeria.

Download the full Report here

____________________________________________________

Daniel Olika

Lead Analyst, Fiscal Policy

dgo@borg.re

Chijioke Ukomadu

Research Analyst

Rachel Ogidan

Research Analyst

Ayotunde Abiodun

Research Analyst

Nigeria’s Value Added Tax at 30: Yesterday, Today and Tomorrow

2024-06-05T00:59:18+00:00

White Paper

Executive Summary

This year made it thirty years since Nigeria began administering the Value Added Tax (VAT). Thirty years in, the VAT has been a constant source of challenge to Nigeria’s federal fiscal structure and has earned the reputation for being Nigeria’s most controversial tax.

Notwithstanding, the VAT has continued to evolve over the past three decades, and we daresay it may have reached its watershed moment. A plethora of reasons account for this state of affairs.

Second, equity considerations about the allocation of a fair share of VAT revenue to the states where a large percentage of the VAT revenues are generated have also resurfaced in recent times.

Download the full Report here

____________________________________________________

Daniel Olika

Lead Analyst, Fiscal Policy

dgo@borg.re

Chijioke Ukomadu

Research Analyst

Rachel Ogidan

Research Analyst

Ayotunde Abiodun

Research Analyst

Disclaimer

The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of borg.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy.

\u00a92024 Borg. Legal & Policy Research

Why Nigeria should be concerned with International Climate Litigation

2024-05-28T17:41:04+00:00

Despite Nigeria's large delegation at COP 28, the country's indifference to climate change is evident in its absence from crucial inrnational legal discussions. This apathy persists even as Nigeria grapples with severe local impacts like flooding and drought. To address these urgent challenges and advocate for equitable solutions, Nigeria must actively engage in global climate justice efforts.

People say that nothing in Nigeria comes as a surprise, yet to be a Nigerian is to be ready for a surprise. Nigeria’s showing at COP 28 by the United Nations Framework Convention on Climate Change (UNFCCC) in the UAE was an 'unsurprising surprise’. Delegates from Nigeria summed up to 1,411 as confirmed by UNFCCC, making Nigeria the country with the highest overall delegates from Africa and tied for the third highest in the world.

Commentary around this in Nigeria tended towards lamentations, especially at a time when the government was constantly pleading with Nigerians to manage the harsh economy, liking it to the biblical period of ‘trial and waiting’ sure to yield a bounteous harvest. You can imagine the disappointment when the UNFCCC attendees list was discovered. The government, in a patchwork of explanations, confirmed the attendance of only 422 delegates on the budget of the government as if to appease already embittered Nigerians.

Concern moved from the shock of a long list of attendees in a national period of austerity to the identities of the delegates themselves. Sons, brothers and allies – many with portfolios not directly concerned with climate change were included. Moving beyond these valid concerns, an important question is the why. Why does Nigeria not seem to care about climate change or emergency? If we cared, we might have had a modest list of people whose role in government can implement the outcomes from the COP in Nigeria. Why is climate change seen as secondary to the myriad concerns we grapple with? Why has the Ministry of Environment been silent on Nigeria’s next steps since COP 28?

International Law and COP

Nigeria is a party to the UN Framework Convention on Climate Change. All parties to the Convention are bound to protect the climate system for the benefit of present and future generations by taking precautionary measures to anticipate, prevent or minimise the causes of climate change and mitigate its adverse effects. One of the essential commitments undertaken by State Parties to the UNFCCC is to “cooperate in preparing for adaptation to the impacts of climate change; develop and elaborate appropriate and integrated plans for coastal zone management, water resources and agriculture, and for the protection and rehabilitation of areas, particularly in Africa, affected by drought and desertification, as well as floods.”

In this respect, the UNFCCC embraces one of the underlying principles of environmental protection: the ‘duty to cooperate’ and recognises the transboundary impact of pollution. Hence, the Conference of the Parties (COP) is a forum for periodic examination of the constraints and progress of the climate agenda. This forum has been particularly instrumental to commitments from States and non-state groups as climate resilience and environmental protection stakeholders.

The ground-breaking Paris Agreement set goals for all stakeholders to achieve climate resilience at CoP 21 and until the latest CoP, States have iterated the goals to fit critical environmental challenges of the day, affirming the use of science and technology as a tool for measuring the impact of environmental damage and embracing adaptation measures, considering the impact of sea-level rise to small island states and embracing indigenous knowledge as a tool for the preservation of traditional climate resilience measures.

"Remember the 2022 floods that had devastating effects across about six States, displacing millions of people and destroying properties. A significant proportion of the floods affected agriculturally rich States and we are not a country known to recover as quickly as we fall."

Over the years, Nigeria has participated in these forums. Gains from the controversial CoP 28 have been highlighted in a previous article but the speech delivered by the immediate past president, Mohammadu Buhari at CoP 26 highlighted Nigeria’s most significant outing so far. While acknowledging the relationship between climate change and economic prosperity, the speech advocated for not only climate resilience but also climate justice which is hardly discussed across the board. In his words, ‘Africa and other developing countries produce only a small proportion of greenhouse gas emissions, compared to industrial economies.

Yet, we are the hardest hit by the consequences of climate change as we see in the sustained droughts in Somalia and floods of unprecedented severity in Pakistan’. The speech ended with an unequivocal call for equitable financing based on the context of all members of the international community. Not much has changed afterwards in terms of achieving equitable climate commitments but for the first time, the question of State obligations for climate change has come before the International Court of Justice (ICJ) and the International Tribunal for the Law of the Sea (ITLOS), hoping for an advisory opinion that would potentially unlock the door to binding international obligations for climate change.

Is Nigeria in denial of the climate problem?

Speaking of the advisory opinion on climate change, Nigeria’s absence is felt both at the ICJ and ITLOS. For the ICJ Advisory Opinion, the General Assembly Resolution bid led by Vanuatu was supported by 18 countries including African countries like Angola, Morocco, Sierra Leone and Uganda. For the ITLOS, the request was submitted by the Commission of Small Island States (COSIS). Both requests are for the court and tribunal to clarify the legal obligations of States concerning climate change.

Between these two advisory opinion requests, States, NGOs and regional organisations have put forward statements highlighting the nuances of their respective concerns, all in a bid to guide the court to a just opinion on the question. At the time of writing, 88 submissions have been made to the ICJ while 34 States have submitted their statements to the ITLOS. This may perhaps be the most engaged advisory request before the international forums, receiving overwhelming support across regions of the world.

Some African States have shown serious interest in their submissions. For example, Sierra Leone’s submission to the ITLOS reflects Buhari’s CoP 26 speech. It recalls the paradox of Africa’s low contribution to Greenhouse Gases (GHG) emissions and its high impact on the effects of climate change and calls for ‘an equitable way forward, firmly rooted in the Convention (UNCLOS) for sharing the burden among States’. A part of its submission explains West Africa’s dependence on agriculture and fishing and its complex geography which exposes it to erosion and drought. Djibouti’s submission highlights an international obligation for States to cooperate in achieving the ‘highest possible mitigation efforts’ for environmental harm and also presents its case as a least-developed country requiring even more deliberate collaborative efforts to meet its GHG reduction targets.

Curiously, Nigeria seems uninterested and not involved. Everyone on the street would ask if matters concerning the environment are worth our national investment. The immediate response is: why not? Like it or not, the impact of climate change is felt around us: coastal flooding in Nigeria has become a concerning mid-year routine problem in the last decade.

Remember the 2022 floods that had devastating effects across about six States, displacing millions of people and destroying properties. A significant proportion of the floods affected agriculturally rich States and we are not a country known to recover as quickly as we fall. The effect on the economy was enormous and we presently still suffer our losses from that situation. This flooding crisis continued in 2023 and is expected to continue until properly mitigated through the construction of drainages and other preventative measures.

On the other end of the spectrum, the incidence of drought is increasing in Nigeria. Declining rainfall in some parts of Northern Nigeria and dry belt areas accounts for an average loss of about 350,000 hectares of land annually according to the Federal Ministry of Environment. For context, this is about the size of Mauritius. This is not to be taken lightly. Much of Nigeria’s hope for agricultural productivity depends on the vast arable lands of the North, yet crop failure, migration of farmers and their livestock, biodiversity loss and other environmental effects slow down production and result in huge economic losses for the country.

The National Emergency and Management Agency (NEMA) provides relief materials to displaced people in times of severe environmental hardship, but we cannot out-relief the negative recurring effects of climate change. It was also in February 2024 that Nigerians experienced up to 40°C heatwave, the highest so far in some parts of West Africa.

Yet we are not alone: our North African counterpart, Tunisia has been grappling with years of severe drought leading to years of food shortages and economic stagnation. As a result, it declared a state of emergency on the use of water, which involved imposing water restrictions in farming and cleaning public areas.

In Southern Africa, Zambia has also recently lost an estimated one million hectares of planted crops due to drought which has been declared a national disaster. As both economies take the hit of this humanitarian disaster of severe magnitude, their governments now explore sustainable solutions to tackle this potentially recurring climate hazard. Some of these alternative options include desalination and purification of wastewater taking Spain’s example, to meet their hydration needs. Nigeria is advised to take its flooding and drought issue seriously, cooperate with neighbours of similar hardship and participate in the global movement for climate equity and justice.

Next steps

Former President Muhammadu Buhari’s speech at CoP 26 emphasising the minimal contribution of developing countries to GHG was applauded for addressing the elephant in the room. It was a call to action founded upon equity and environmental justice. Yet, it remains what it is – a call to action, a springboard. Now is the time for Nigeria, Africa and the developing world to robustly participate in the process that delivers environmental equity.

The key questions before the ICJ and the ITLOS focus on what State obligations are to ensure the protection of the climate system, to prevent, reduce and control pollution in relation to the deleterious effects that result or are likely to result from climate change and what the legal consequences should be for significant harm to the environment.

In all of this, Nigeria should not be missing. As a country that experiences the challenge of flooding and drought in agriculturally important regions, we have a case to submit and a perspective to share. A case that should compel the international community to choose equity in determining State obligations and more importantly, to ensure firm consequences for any breach resulting in a negative environmental impact on our lands.

Silence or indifference is not an option.

Author

Elizabeth Nwareuze | Sr Analyst, Foreign Policy | e.n@borg.re

Submit your paper to the Borg Quarterly

2024-04-16T22:11:34+00:00

Quarterly

We are mobilising ideas for development.

borg. invites submissions for its upcoming periodic publication. We welcome contributions across various disciplines on key issues shaping contemporary African society.

Topics of interest include but are not limited to Foreign policy, technology and innovations, trade and investment, fiscal policy reforms and economic development, governance and political dynamics, social justice and human rights, power and renewable energy, education and healthcare.

Length: [Commentary] - 1500 -2000 words, [Position Paper] - 1500 -2000 words, [Article] - 2000 - 4000 words.

Submissions are now on a rolling basis.

We welcome papers on diverse topics. However, we are particularly interested in those that contribute to Nigeria’s and Africa’s development, shape public policy or have the propensity to foster public debate.

If that sounds like your work, please fill out the form here or send it to us at: ideas@borg.re titled "Quarterly Policy Submission"

All contributions must be in the form of a Word Doc. attached to the email.
The author's name, contact details and title should be included in the mail.

We look forward to receiving your contributions.

Taxpayers’ Money or National Cake? Appraising Nigeria’s Anti-Corruption Campaign between 2015 and 2023

2024-01-29T17:03:15+00:00

White Paper

Executive Summary

President Muhammadu Buhari (“Buhari” or “President Buhari”) became President of the Federal Republic of Nigeria on May 29, 2015. Buhari will go on to be President for the next eight years, till May 29, 2023. While on the campaign trail between 2014 and 2015, President Buhari vowed to grind corruption in Nigeria to a halt. This campaign promise is arguably one that endeared him to Nigerians who were hungry for a change of guard from the wanton corruption that had characterised his predecessor’s regime.

This Report adopts a qualitative approach to analysing the effectiveness or otherwise of the anti-corruption campaign of the Buhari regime. In this Report, we analyse various initiatives introduced by the Buhari presidency to combat corruption. We find that although most of these initiatives were designed with the best intentions, the anti-corruption campaign in the Buhari regime was generally selective and deployed to attack political opponents.

Additionally, we find that the anti-corruption agencies seemed to have focused on internet scams and lower-level corruption but did not deal any serious blows to the grand and official corruption of the rich and powerful politicians. The combined effect of these lowered the belief of the ordinary Nigerian in the effectiveness and/or willingness of his presidency to fight corruption. Available data also suggests that the Buhari government was able to recover some of the funds looted by the late General Sani Abacha. Unfortunately, whatever points were gained by the government for the recovery of the Abacha loot were lost by the government for the lack of transparency and accountability in the management of the recovered loot.

Some of the other problems that plagued the anti-corruption campaign during this period include: underfunding of the anti-corruption agencies, lack of citizen participation in the anti-corruption campaign, executive lawlessness, judicial corruption, poor interagency relationships, and so on. Thus, almost a year after the Buhari presidency, and having had the opportunity to fight corruption for eight years, it is difficult to call the anti-corruption campaign of the 2015 to 2023 years a success.

Accordingly, we have highlighted some recommendations for subsequent governments to prioritise if they are serious about fighting corruption.

Download the full Report here

Daniel Olika | Lead Analyst, Fiscal Policy | dgo@borg.re

Lily Odunaiya | Research Analyst

Oludayo Olowofobi | Research Analyst

Olayinka Shado | Research Analyst

Adepoju Emmanuel | design

Disclaimer

The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of borg.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy.

\u00a92024 Borg. Legal & Policy Research

Women in Politics: the Nigerian story and the way forward

2023-04-13T22:20:52+00:00

#234Vote

Nigeria has continued to record a low representation of women in politics despite the fact that women constitute almost half of the country’s total population. On #234Vote we look at some strictures that hinder women from participating in politics within Nigeria.

Nigeria has continued to record a low representation of women in politics despite the fact that women constitute almost half of the country’s total population. In the country’s history of elected government officials, there has not been one female president, vice president or state governor. For the office of the deputy governor, the highest number of women to occupy that seat in a single election was 6 in 2007, out of 36 available seats. The situation is no better in the legislative houses at both federal and state levels.

Out of the 109 seats available in the Senate, 3 of those seats were occupied by women in 1999, 4 in 2003, 8 in 2007, 7 in 2011, 2015, and 2019. In the House of Representatives, out of 360 seats available in 2019, only 11 seats were occupied by women, a decline from the 22 female lawmakers elected in the 2011 elections. In the same year of 2019, a total of 40 women were elected into the 36 state houses of assembly (a total of 990 available seats).

At the local government level, the case of low women representation has also played out with a wide gap of men to women local government chairpersons and councillors. Political appointments at both the federal and state levels have not been any better for women. Female ministers account for only 15.91% of the 43-member ministerial list in the current government administration.

Reasons for the low level of women's participation in politics

Several factors have been considered responsible for this trend. First, there is a socio-cultural problem. Nigeria is largely a patriarchal society, where many industries and sectors are dominated by men. The perceived traditional role of the woman as a homemaker has continued to play out in several parts of the country. The late introduction of women’s rights in the world, such as the right to vote and be voted for, echoes the patriarchal nature of many societies, of which Nigeria is one.

In some parts of the country to this day, the right of female children to basic education is under threat by insurgents and terrorists, who believe that it is not in a girl’s place to have a formal education. A message that has been preserved for generations. Despite the fact that more women are beginning to occupy leadership positions in corporate organizations, it is still a fact that in many parts of the country, the role of women does not go beyond household matters. This sort of culture fosters a mindset in women that taking up positions of authority outside the home is wrong and unthinkable.

Closely linked to the first point is the responsibilities of the home. The many responsibilities a woman has on the home front does not afford her the large amount of time that is required to be active in politicking. In the more urban areas where women also have corporate jobs or run businesses, their time is further divided. She can’t compete especially in Nigeria where career politicians are prevalent.

The nature of politics in Nigeria has also contributed to the low participation of women in politics. Politics in Nigeria is seen as a dirty game, one that is filled with corruption and violence. Elections are often fraught with irregularities such as snatching ballot boxes, fighting and death. Receiving political appointments is also said to only be possible upon giving something in return to government officials. Many women often cannot bring themselves to be in the middle of the endless fight to attain power at any means.

The cost of contesting in elections, first at the primaries and up to the main elections is too expensive and discourages many women from trying. The Presidential nomination form under one of the major political parties in Nigeria costs up to N45million. This exorbitant cost only serves to disenfranchise the majority of Nigerians, seeing as recent statistics show that 82.9 million Nigerians live in poverty. As almost half of the country’s population is made up of women, they are also negatively affected by the high cost of purchasing nomination forms and campaigning.

"Women candidates often do not receive adequate support from their political parties, both in the area of nomination and financing."

Another factor that hinders the participation of women in politics is voter bias. Women candidates are often disadvantaged by unfavourable voters’ attitudes towards them. Beliefs that women candidates are not suitable for the offices they contest for, or that the responsibilities under those offices are too rigorous and tasking for the sensibilities of the woman, serve to put her in an unfavourable position as opposed to her male counterpart who is also contesting.

Lastly, political parties in Nigeria's leadership are largely comprised of men. Women candidates often do not receive adequate support from their political parties, both in the area of nomination and financing. It is therefore difficult for women candidates to successfully run for public offices.

Countries with a high representation of women in politics

Several countries have done well in terms of fostering greater participation of women in politics. Some of these countries include Rwanda, Cuba, United Arab Emirates, and Grenada, among others. In Rwanda, women occupy 61% of its parliamentary seats. Over the years, the country has continued to record a consistent increase in the percentage of women occupying seats in Parliament. The 2003 Rwandan Constitution set a 30% quota for women Parliament members, hence the impressive increase from 18% of women representation in Parliament in the 1990s to 61% currently.

The United Arab Emirates has also done well to increase the number of women in the country’s parliament. In 2018, President Sheikh Khalifa called for Emirati women to occupy half of the seats on the Federal National Council. By creating quotas for increased women's representation in parliament, the country made an impressive jump from 85th in the world in 2019 to 3rd in the world in 2021.

What Nigeria can do differently to increase women's participation in politics

All hope is not lost for Nigeria. Taking a cue from the successes of other nations in how well their women are represented in politics, there are several steps Nigeria can take to ensure gender parity in the nation’s political structure.

To start with, the Government has a duty to protect the rights of its citizens. Having noted earlier that insecurity in some parts of the country is targeted at the right of the girl child to education, the Government should relentlessly fight to put an end to the threat. Without an education, a girl is disadvantaged and unable to provide workable solutions to the complex problems in our nation’s economy.

Second, whilst appointments into federal and state cabinets, and other political appointments should be by merit, it is still key that Government should be mindful of striking a gender balance. It is therefore recommended that the country’s 35% affirmative action for women's representation in politics be increased to 40% and codified into law. Having legislation that requires Government at all levels to have at least 40% representation of women in appointive public service positions will be a good way to engender greater participation of women in politics.

Again, whilst merit should always be prioritised in the appointment of people into public offices, there is a disproportionate number of men in those public service positions. This proposed legislation will also help to encourage the training and empowerment of women with knowledge and skills, relevant to the various appointive offices so that when it is time for appointments, the excuse that there are no qualified women will not hold water.

"The cost of nomination forms should be determined having due regard to the economic standing of the majority and not the minority."

Third, having noted the high costs of purchasing political office nomination forms, it is recommended that the Independent National Electoral Commission (INEC) set a limit for political parties as to how much their nomination tickets should cost. One of the functions of INEC is to “Provide rules and guidelines for...the operation and conduct of political parties”. The cost of nomination forms should be determined having due regard to the economic standing of the majority and not the minority. The goal is to preserve the right of citizens, women inclusive, to be voted for, and not to disenfranchise them.

Fourth, sensitization programs, focused on young women, should be regularly organized. These programs can target females in tertiary institutions, those undergoing their National Youth Service Corps programme and other women. The purpose should be to sensitize these women on the need to get actively involved in politics, as well as provide them with information as to how to get involved. This exercise can be undertaken by the Federal Ministry of Women Affairs and Social Development, and the Ministry of Women Affairs in each state of the federation.

Following the fourth point above, training and mentorship for female political candidates/women in politics should be aggressively embarked upon. INEC can include it as part of its guidelines for political parties that the parties should have a training/mentorship session, at least once a year, for women aspiring for political offices. The Government can also partner with international bodies like UN Women to run such training.

In the 2013 Kenyan elections, the number of women legislators rose to more than 20%, more than double compared to the previous elections. As reported by the UN Women, they contributed to this result by providing training to nearly 900 female candidates in all 47 countries and running a Campaign for Women in Leadership to encourage voters to vote for women. In Nigeria, the training for female politicians and those aspiring can be focused on leadership and decision-making, as well as political campaigning.

To address the issue of voter bias, it is recommended that INEC should organize regular sensitization programs, targeted at the voting public to correct the notion that women are not suited for politics or cannot handle the demands of public offices. It is important that the public understands that both men and women have an equal right to contest for public office, up to the seat of the President of the country, and that women are not disadvantaged by reason only of their gender.

Finally, INEC should develop stronger structures to ensure that elections are free of violence. Snatching of ballot boxes, shootings and other forms of violence at voting centres discourage Nigerians, both women and men from going out to vote.

Nigeria still has a long way to go to achieve gender parity in politics. However, it is not an impossible task. What is required is a determination by policymakers, government and interest groups, to aggressively tackle the challenges that prevent Nigerian women from being actively involved in the nation's politics.

Author

Emaediong Lawrence | Research Analyst | e.l@borg.re

Does Nigeria Need a Platform Responsibility Regime for Social Media? Lessons from the Twitter Ban

2022-12-01T19:16:55+00:00

Nigeria’s struggles with internet content regulation have remained unsolved after prolonged debate on the issue. More recent attempts at social media regulation by the government, tell of a shift of the government’s focus from internet content regulation through speech control laws to a focus on platform regulation which bypasses the legislature. A properly thought-out platform responsibility regime would go a long way in resolving the issues of internet content regulation in Nigeria and may put an end to the continuous friction between the government and internet stakeholders.

With the increasing popularity of social media platforms (such as Twitter and its rise to becoming the de facto town square for public discourse) and their rising real-world implications, governments worldwide are increasingly agitating to modulate harmful or illegal activities of citizens on social media.

Some of these harmful behaviours, such as hate speech, disinformation, misinformation, cybercrime, intellectual property infringement, child pornography and other kinds of harmful content disseminated or behaviours carried out through social media, may, if unchecked, unravel social justice, public morality, public safety, democratic institutions, and national security. The need to find ways to address these concerns has spawned global policy debates on possible frameworks to regulate internet content.

These debates fall under the broader conversations on internet regulation and, in recent times, have centred on whether social media companies should be made to be responsible for activities and content on their platforms. These debates are finding roots in Africa and Nigeria precisely, in the face of ongoing frictions between social media platforms and constituted governments. Although Nigeria’s struggles with this issue mirror the broader global challenges that remain unresolved, there is a sense that Nigeria needs to urgently find a sustainable solution within her context in the wake of recent events.

The Twitter Ban as a Problem of Internet Content Regulation

On June 4, 2021, the Nigerian government banned Twitter. In a decision from the Presidency relayed by the Ministry of Information, Telecoms companies were demanded to block access to Twitter by users in Nigeria. The ban came after Twitter had removed a post from President Muhammadu Buhari that threatened to punish specific groups of people within the country with violence in response to secessionist agitations. These tweets were removed by Twitter, as they went against the microblogging platform’s user rules which prohibit content that threatens or incites violence.

The government would subsequently insist that the ban was not a response to the deletion of the President’s tweets by Twitter. Instead, they were informed by the “litany of problems with the social media platform in Nigeria,” such as its uses for spreading “misinformation and fake news which have had real-world violent consequences.” It would appear these issues finally came to a head following the deletion of the President’s tweet.

These concerns, to the extent that they are true, are instructive. The impulse to ban Twitter, for what became seven months, reflects Nigeria’s more banzai approach to technology regulation and is condemnable for its human rights implications, authoritarian overtone, and impact on the economy.

But, make no mistakes about it, Nigeria has an actual need to modulate or limit the excesses of harmful online content and behaviour. This is especially true given the polarising heterogeneousness of the country, which amplifies harmful content, especially hate speech and disinformation and can lead to serious real-world effects. The Nigerian Twitter community, for example, is awash with the propagation of tribalism, bigotry and hate speech, as individuals with these views can easily find niches that can reinforce their views. As this continues, conflicting groups may well goad each other to violence.

Nigeria’s Earlier Attempts at Speech Control

Before the Twitter Ban, the Nigerian government had courted ideas of creating legislation to control/criminalise certain kinds of content on social media. Bills like the Frivolous Petitions and Other Matters Connected Therewith Bill (nicknamed the “Anti-Social Media” Bill”), the Protection from Internet Falsehood and Manipulation and Other Related Matters Bill, 2019 (referred to as the “Social Media Bill”) and the National Commission for the Prohibition of Hate Speeches Bill (often called the “Hate Speech Bill”) were touted at various points within the last few years to address some of these concerns.

These bills failed to make it into law due primarily to much-needed human rights objections. The Anti-Social Media bill, for example, aimed to criminalises publications which discredit government institutions, amongst other problematic provisions. The Social Media Bill, proposed draconian rules, criminalised a broad range of online interactions and was mostly a thinly veiled attempt by the government to create a means of prosecuting criticism of the government online.

The Hate Speech Bill, claimed to be aimed at prohibiting the commission of ethnic discrimination, hate speech, harassment based on ethnicity, ethnic or racial contempt and discrimination by way of victimisation by individuals or corporate bodies. Instead, it was composed of purposefully ambiguous provisions intended, which had the effect of criminalising a wide range of otherwise allowable speech, proposes capital punishment for contravention, had the potential to heighten ethnic intolerance and showed a similar draconian verve.

The bills, beyond their human rights failures, are demonstrable insufficient attempts at solving the problem of harmful content on the internet. For one thing, the approach of speech control by criminalisation is not only blatantly anachronistic but also inherently problematic, especially if proposed with an ulterior political motive.

For another, content-based laws, or regulations, which broadly discriminate against speech based on the substance of what they communicate, are tricky to navigate and require a careful balancing act to differentiate between what speech cannot be rightly outlawed even where politically uncomfortable (considering the universally guaranteed right to freedom of expression) and what speech is sufficiently toxic enough to justify derogation. This nuance is sorely lacking in the proposed regulations.

Additionally, the mechanisms for enforcement of what was effectively speech control in the proposed regulations were either not thought out, barely fleshed out, or categorically deficient. For bills that proposed to regulate speech, the glaring lack of transparent enforcement and contestation mechanisms and independent administrative and redress measures meant that the reins would be left completely at the discretion of the government. This is simply unsustainable.

A Partial Platform Responsibility Regime for Nigeria

A platform responsibility approach to internet content regulation undertakes to moderate harmful activities on the internet by placing expectations on platform service providers as to what speech should be allowed on their platform, within the jurisdiction of the country establishing the regulation.

There are some reasons why platform responsibility is considered a good approach to internet content regulation. First, social media platforms, even where they operate within a country’s territorial jurisdiction and are regulated by such country’s laws, operate their communities as private independent zones.

Essentially, their policies and user rules dictate allowed and allowable behaviour on their platforms. They have the prerogative to do so since an online platform does not fall within the territorial jurisdiction of any country, even where the corporate entity running it does. This is not to say that governments cannot punish activities on these platforms in the real world; it simply means that they cannot create rules for behaviour directly enforceable on those platforms.

Second, the infrastructure for operating the communities created by social media platforms is controlled exclusively by social media companies. This means that governments can hardly enforce any control over behaviour on the internet, at least not directly. Platform responsibility has emerged, therefore, as a response to these challenges, as they allow the government to exercise needed control through social media companies.

Nigeria could use a platform responsibility regime. Not only does a platform responsibility regime resolve some of the inherent limitations of previous attempts at speech control, but it could also, where properly implemented, help avoid human rights problems which exist with a speech control regulation approach.

It bears saying that if Nigeria is to establish a platform responsibility regime, it would have to do so with proper regard for human rights, with careful, thought-out mechanisms which respect international best practices and through a multistakeholder process which ensure that the perspectives of a variety of actors within the internet ecosystem, including social media companies themselves, are synthesised.

To create a platform responsibility regime, Nigeria can develop a law establishing human-rights protective rules around unlawful online content/activity. The law should carefully define what is hate speech, for instance, ensuring that only speech which legally warrants derogation of the right to freedom of expression is outlined as harmful speech and ensuring it draws a line between truly harmful speech and uncomfortable speech, as the latter should not, under any circumstances, be considered unlawful.

The law would also outline responsibilities on social media platforms to support the implementation of these rules, leveraging existing content moderation infrastructure, especially around unique pain points such as bigotry or disinformation. These obligations should promote platform responsibility while allowing platforms adequate room to operate independently. Platforms should also receive protection under a “Good Samaritan” provision to encourage discretionary moderation.

The proposed law should incorporate comprehensive public and private “reporting procedures” to support the combating of unlawful activities. The public “reporting” process should be operated by a designated authority with ostensible independence. The designated authority will receive complaints from public bodies about unlawful content on platforms, consider them against the yardstick of unlawfulness, and make a take-down request if convinced that the content is unlawful or other requests regarding other kinds of unlawful behaviour.

Platforms should be given sufficient time to consider take-down requests and at least a 48-hour window should be allowed for expedited requests. The authority may also conduct investigations and make requests independently. The Private “reporting” process would be open for individuals to make only take-down requests based on the law. Regarding individuals that put up unlawful content, liability should not extend beyond the takedown of content, restriction of accounts or ban from platforms.

Civil liability beyond the preceding may only be exercised where online content or activity is followed by or directly results in real-world harm. The law should generally avoid establishing criminal liability for content, but criminal liability, with limited sanctions, can be implemented for other online activities which would qualify as crimes under territorial law.

Platforms should be allowed sufficient discretion to decide whether content or request is justified based on the regulation and may refuse requests where it believes such requests are not justified. Further to this, there should be provisions for quasi-judicial contestation of takedowns. To achieve this, an oversight authority can be created to interface with relevant platforms, having powers to consider the contestation of takedowns, address complaints and conduct reviews as a first-level recourse.

Most importantly, however, the law should impose only limited liability on platforms for the content they distribute. This liability should be civil in scope and should be restricted to (a) content that the platform refuses to take down following a directive from the oversight authority, (b) content that the platform directly controls, and (c) content that the platform promotes under conditions incompatible with standards of net neutrality.

Liability should be varied, and different penalties should apply depending on severity – none of which should include veiled censorship. Importantly, non-platform/infrastructural internet intermediaries such as Internet Service Providers (ISPs) and Content Delivery Networks (CDNs) should be excluded from liability.

Nigeria’s “Attempts” at Platform Responsibility

Following the Twitter Ban, the Nigerian Broadcasting Commission (“NBC”) was tasked to create a regulatory regime for over-the-top service providers in an attempt at internet content regulation through over-the-top (“OTT”) services regulation. NBC, through its “Framework for Online Media Regulation” and “Regulations of Over-The-Top Services and Video–On–Demand Services in Nigeria,” attempted to do just that by categorising social media platforms as providing broadcasting services and requiring them to register as OTTs. This attempt, which eventually failed, was criticised for its back-door approach to platform regulation, for erroneously categorising social media platforms as broadcasting entities.

Recently, the National Information Technology Development Agency (“NITDA”) proposed a Draft Code of Practice for Interactive Computer Service Platforms/Internet Intermediaries remains the most coherent attempt at internet content regulation through platform responsibility. The draft code, which was opened for stakeholder comments, was also criticised for its problematic provisions.

In addition to being ambiguous, the Code requires platforms to act treat requests and take down prohibited content within 24 hours, creates criminal liability on users in Nigeria for a broad range of content labelled “prohibited,” creates a liability by proxy for users in Nigeria who share content originating outside Nigeria, compels platforms to police users and generally adopts suspicious requirements on platforms to share trend data. Although the Code has not been passed by NITDA, the predominant sentiment is that it should not be.

Conclusions

Nigeria’s struggles with internet content regulation continue. More recent attempts at social media regulation by the government through the NBC and NITDA tell of a shift of the government’s focus from internet content regulation through speech control laws — which have so far been refuted by the legislature — to a focus on using existing regulatory bodies to establish subsidiary legislation that by-pass the legislature. This echoes the bent of the government on regulating social media, for better or worse.

If the Twitter Ban was any evidence, gung-ho rules driven by political impulse cause more problems than they solve. The approximation is that Nigeria lost no less than half a trillion naira from the seven-month-long ban.

A properly thought-out platform liability regime would go a long way in resolving the issues of internet content regulation in Nigeria and put an end to the continuous friction between the government and other internet stakeholders. If nothing else, it would limit, if not completely prevent, the occurrence of perversions of regulation such as the Twitter ban. It could also provide important direction for other African countries with similar political contexts experiencing similar challenges.

Author

Vincent Okonkwo | Lead Research Analyst, Tech and Innovation Policy | v.o@borg.re

Africa’s Internet Control Problem: New Frames for Combating Internet Shutdowns in Africa

2022-11-29T20:04:46+00:00

In the second of our two-part series, this commentary proposes an integrated approach towards combating the prevalent issue of internet shutdowns in Africa, based on multistakeholder ideals.

The Limits of Existing Interventions

As Internet shutdowns continue to occur in Africa, there has been no shortage of efforts to resist them. So far, most approaches to combating internet shutdowns in Africa take the form of decentralised protests by affected users, culminating either in actual demonstrations or deliberate attempts to bypass shutdown measures, such as the use of virtual private networks.

They also take the form of agitations and advocacy led by local and international civic society organisations or strategic litigation before national and supranational panels by internet advocacy bodies.

These approaches each suffer inherent limitations. Operating these interventions in isolation often only addresses parts of the problem where they yield any results in the first place. For example, where agitations can help restore the internet after it has been shut down, they are “after the fact” and are unlikely to prevent internet shutdowns or stop the government from achieving the ulterior purposes behind shutdowns.

Similarly, where litigation helps restate the obligation of states to protect the interest of the citizenry or to admonish states for human rights violations through internet shutdowns, they themselves hardly enforced (or enforceable) and rarely impact whether states will resort to internet shutdowns again. User attempts at bypassing internet shutdown measures help combat shutdowns while they are ongoing but are not particularly useful in addressing the policy and governance failures that culminate in internet shutdowns, while general advocacy relies too much on the willingness of governments to listen.

Multistakeholderism and Co-creation as a Policy Approach

The inherent limitations of available responses to internet shutdowns can be addressed by operating complementary interventions at the same time. This is because, due to the multidimensional nature of the issue of internet shutdowns, there is a need for synchronisation across stakeholder gro to achieve the best range of results consistently. The case, therefore, for multi-strategy and multistakeholder approaches to combating internet shutdowns is self-apparent.

Through multistakeholder cooperation, local stakeholders in the internet community cutting a broad foundation of interested parties – including businesses, technical experts, civil society, governments and everyday users – can come together to work in conjunction towards achieving consensus and implementing complementary strategic and proactive approaches to the problem of internet shutdowns.

Moreover, a multistakeholder approach to combating internet shutdowns opens new fronts for combating the problem, which may not be available or accessible to any individual or group actors in isolation, such as the possibility of dialogue with governments towards co-regulation strategies or collaboration to develop the diversity of internet connectivity to limit government power to shut down the internet through “kill switches.”

Implementing Multistakeholderism

The first and most vital step towards achieving multistakeholder collaboration, whether in the form of multistakeholder processes or cooperation, is establishing lines of communication. Local internet communities must develop channels of communication that allow for integration, collaboration, and open engagement across stakeholders. This can be done by utilising existing Internet governance structures and networks, such as the local Internet Society community or the Local Internet Governance Forum (IGF) meetings to congregate stakeholders and build collective approaches to combat internet shutdowns locally.

Another way this can be achieved would be through developing inclusive multistakeholder coalitions specifically for addressing issues of internet shutdowns, through which fora collective action can be fostered. Already, citizens in African countries affected by or prone to internet shutdowns have started to form multi-stakeholder coalitions that support internet freedom. These coalitions not only rest internet shutdowns, but also pressure governments and other actors to create, abide by, and respect policies that promote internet freedom.

Mapping Multistakeholder Collaboration for Combating Internet Shutdowns

Stakeholder One: Private Sector

Private actors, such as telecommunications companies, internet service providers and technology companies, should work in tandem with civic society organisations (“CSOs”) in advocating against using internet service providers as handmaids for internet shutdowns and throttling. They can also collaborate with CSOs and the technical community to request governments to clarify their expectations on network control and agree on a predetermined modus of operation in respect of blocking orders, which can be insisted on in the event of unusual requests by the governments.

They can also adopt transparency measures and due diligence mechanisms based on enhanced understanding and collaboration with CSOs, research actors, non-governmental bodies, and others to support the availability of clear information regarding internet shutdowns. They can further engender support for their engagements with governments in the face of shutdown requests by leveraging international collaboration and support. For example, the Global Network Initiative (GNI) has developed a mechanism for local ISPs to report when they receive unconventional demands from the government.

Also, membership in the International Telecommunication Union now includes technology and telecommunications companies. Local companies may be able to utilise this forum to support technical advocacy, restate issues and garner international sponsorship in combating internet shutdowns, with support from advocacy organisations.

Stakeholder Two: Civic Society Organisations

CSOs can collaborate with internet service providers and telecommunications companies to better understand the technical mechanisms available to the government for internet disruption and, in so doing, better drive more concerted conversations on limiting government control over internet infrastructure, whether by ensuring autonomy and privatisation of internet service providers, strengthening of licensing and regulatory frameworks to ensure licensing cannot be arbitrarily revoked, grounding justifications to interfere with networks in law, creating legal barriers to network disruption (such as requiring court authorisation for orders affecting network access), the democratisation of management of internet infrastructure, preventing or advocating against the creation of single internet gateways or “choke points etc.”

They may also be able to collaborate with human rights organisations and non-governmental bodies to undertake litigation against governments and government bodies before national or supranational courts upon suspicion of possible internet shutdowns or following internet shutdowns, as well as collaborate with international governmental organisations to assert pressure on governments to comply with court decisions in this respect.

Civic society organisations can also work in conjunction with academia and the government stakeholder to better understand the precipitating factors behind internet shutdowns and understand how best to resolve underlying frictions, whether through championing the development of balanced partial platform regulation legislations or by bridging the conversation between government and internet platforms, towards cooperation in fighting issues of hate speech, fake news, disinformation or political propaganda, that may otherwise entice government into internet restriction.

Stakeholder Three - Governments

The government stakeholder groups can work with the civic society stakeholder groups and users to better understand the human rights issues posed by internet shutdowns, the inefficiencies of internet restriction measures and better ways to address genuine public policy concerns resulting from internet activities. Governments can, in collaboration with civic society organisations, non-governmental organizations, human rights organisations, private sector, among other actors, establish clear policies on the operation of local laws within cyberspace.

Democratic governments of other countries can also play support roles in influencing the actions of governments adopting internet shutdowns, such as by helping establish clear multilateral norms regarding prohibitions against internet shutdowns and long-term internet controls; issuing consistent public condemnations against internet shutdowns; and creating multilateral entities responsible for codifying and enforcing policy standards.

They can also discourage restrictive actions by such governments by adopting foreign policy stances that decry internet shutdowns and disruptions (such as adopting economic sanctions to influence state decisions) and by working with local civic society organisations and private actors to support citizens during shutdowns such as through the provision of circumvention tools, alternative means of internet access and “internet refugee” stations.

Stakeholder Four – International Bodies

International bodies can also play a major role as stakeholders in the internet community. While bodies like the Economic Community of West African States have been explicit in their stance on internet shutdowns, through decisions such as that in Amnesty International Togo and Ors v. The Togolese Republic and recently, in respect of the Twitter Ban in Nigeria, more international bodies with interest in the internet need to get involved in safeguarding the internet from unlawful shutdowns.

International Governmental Organisations can collaborate with local CSOs, platform service providers and technology companies to push for the adoption of international statutes protecting the right to access and use the internet, such as the UN Guiding Principles on Business and Human Rights (UNGPs), the Global Network Initiative (GNI) Principles, the Universal Declaration of Human Rights and Article 21 of the International Covenant on Civil and Political Rights.

They can also work in conjunction with other democratic governments to enforce the obligations of state members concerning online freedoms, as well as to implement international sanctions against member states which use shutdowns to curb these freedoms.

Conclusion

Irrespective of what form they take, internet shutdowns present the same series of challenges to society and the internet community – they threaten the internet’s purpose of connecting all people, truncate the principles of openness and freedom of access (which constitute the philosophical backbone of the internet) and severely hamper the internet rights and freedoms of the people affected by them. They also accentuate the global internet community’s concerns around internet fragmentation, compromise the security, safety and resilience of the internet, and are enduring evidence of a failure of accountability on the part of state actors.

The challenges presented by internet shutdowns and the emergence of digital authoritarianism in Africa compound the policy issues already facing the internet and detract from the further development of the internet in the continent. It is important, therefore, not as a matter of luxury, but as a necessity, that measures which have the effect of preventing internet shutdowns or nullifying/limiting the impact of attempts at internet shutdowns in Africa be eagerly embraced.

Already, multistakeholder processes and approaches have proven to be best suited to address policy issues affecting the internet, considering the policy and technical complexities of the internet. Some of the approaches identified in this commentary can serve as a bedrock for developing comprehensive multistakeholder collaboration and co-creation strategies for use by local internet communities. In establishing local strategies, references should be made to the unique local contexts and the priorities driving collaboration. The successes of local responses in the next few years may well determine the future of the internet in Africa.

Author

Vincent Okonkwo | Lead Analyst, Tech and Innovation Policy | v.o@borg.re

Internet Rights and the New Frontier of the Fight for Freedom in Africa

2022-11-29T18:22:58+00:00

As more Africans access the Internet and as activities on the Internet have blossomed, so have actions which threaten the rights of Internet users in Africa. Left unchecked, these actions compromise the safety of Internet users, depreciate the Internet and retard developmental growth and efforts. Across the continent, there is a clear call to action on the latest frontier of the war for human rights.

Through the internet, Africans are acquiring new knowledge, evolving novel business models, collaborating across borders, and participating in the overall value creation of the digital economy. The internet could reduce poverty, improve education, improve access to health care, revolutionise agriculture and food security, hotwire economic development and help solve some of the most complex developmental challenges faced by the continent.

Yet, as more Africans access the internet and as activities on the internet have blossomed, so have actions which threaten the rights of Internet users in Africa. These actions, undertaken from public and private sources alike, inform a new iteration of the continuing challenges to the human rights and freedoms of citizens of many African countries. Left unchecked, they compromise the safety of Internet users, depreciate the Internet, which is intended to be a free, open, and inclusive resource and retard developmental growth and efforts. Across the continent, there is a clear call to action on the latest frontier of the war for human rights.

In Africa, the biggest threat to internet rights and freedoms appears to be constituted governments. As the Internet has evolved as a communication tool, it has become central to the operations and preservation of political structures. Governments and political bodies are therefore adopting measures to regulate cyber-based activities. These measures often involve politically informed censorship and Internet shutdowns.

In 2021, Africa was recorded as the most censorship-intensive region in the world, with 12 countries shutting down the Internet, and with Africa responsible for about 35 per cent of all internet shutdowns in the year. The pattern of internet censorship in Africa is particularly concerning as they show that these measures are implemented by governments, not for public good or safety purposes, but often for undemocratic purposes such as controlling information dissemination during elections (Congo, Zambia, Uganda), to repress political protests, or to gag government critics and other forms of civic disruptions detrimental to the government (Nigeria, Burkina Faso, South Sudan, Chad).

In addition to censorship, governments similarly adopt other persecutory measures, whether online or offline, to disincentivise the free exercise of Internet rights. These may include media gagging through regulatory threats, crackdowns on Internet users who speak or act against the dictates of governments and targeted cyberattacks. In countries such as Nigeria, Uganda, Kenya, Ethiopia, and Tunisia, among others, for example, numerous cases have been recorded of clandestine arrest and persecution of bloggers, journalists and other key Internet users based on online comments.

Beyond governments, the activities of individuals on social media platforms and the actions of social media actors/platforms increasingly undermine the rights and freedoms of users in Africa. These include cyberbullying, defamation on the Internet, implicit censorship, privacy breaches, infringement on intellectual property and other proprietary rights, exclusion and discrimination, and online persecution for thought and opinions.

Similarly, the actions of social media platforms may often result in breaches of the rights of individuals on the internet. These can either take the form of wrongful moderation and censorship, discrimination resulting from automated profiling or otherwise, breaches of privacy/non-compliance with data protection standards, abuse of data rights and exploitation of personal data for commercial purposes, etc. Often, within the African context, these abuses take a more problematic outlook due to the dearth of developed legal structures to protect human rights and contest infringement on the Internet.

The anecdotal evidence of the abuse, whether by individuals and social media platforms or by governments, demonstrate the urgent need for concerted attempts to establish and preserve internet freedoms in Africa.

Already, a burst of independent responses has emerged. They include the actions of local civic society organisations which engage in advocacy for human rights and legislative activism concerning Internet rights issues (such as Paradigm Initiative and Socio-Economic Rights and Accountability Project in Nigeria or CIPESA in Southern Africa), international organisations with a mandate to ensure access to the Internet and the right to the Internet (such as Access Now, the Electronic Frontier Foundation or the Open Rights Group), private sector initiatives, and decentralised individual responses, some of which take the shape of digital activism, civil disobedience, and guerrilla measures for avoiding government censorship.

There have also been efforts to establish common legal standards for the protection of Internet rights across the continent. These efforts include the development of instruments such as the African Declaration on Internet Rights and Freedoms and the Declaration of Principles on Freedom of Expression and Access to Information in Africa and have established some level of legal and policy blueprints for Internet rights legislation in Africa.

But more needs to be done. It is important to continue to engage in efforts to preserve and promote internet rights in Africa on multiple fronts. Different stakeholders within the Internet ecosystem, including civic society organisation, private organisations and users, need to understand the stakes and contribute within the context of their activities to improving the landscape for Internet rights across the continent.

On the part of civic organisations, it is important to continue to agitate against the abuse of internet rights through legitimate avenues, irrespective of the challenges posed. It is also critical to ensure that information on Internet rights and the existing mechanisms for their implementation are made available to the public.

Private organisations and media outlets should strive to sensitise people on internet freedoms and expose activities threatening the internet and internet rights and should endeavour to respect the internet rights and freedoms, particularly the rights to privacy of people they interact with. Youth, digital citizens, and internet users, self-education and openness to sensitization on digital policy and rights would help ensure everyone is equipped to defend Internet rights on the new frontier of the fight for freedoms in Africa, including by denouncing actions which infringe the rights of others on the internet.

For governments, there could be no better time to start exploring human-rights-sensitive pathways and policies through the challenges to democracy, security, and development (where they exist) posed by activities in cyberspace as an alternative to the repression of internet rights. If Africa is to get it right at this juncture, it is important that all stakeholders, especially governments, evolve new ways of thinking about the internet and internet use, starting with internet rights.

Author

Vincent Okonkwo | Lead Analyst, Tech and Innovation Policy | v.o@borg.re

Africa’s Internet Control Problem: A Picture of Internet Shutdowns in Africa

2022-11-29T17:15:33+00:00

In Africa, internet shutdowns take on unique implications as they are used by governments to control speech, repress opposition, cover up human rights abuse and tamper with democratic processes. In the first of a two-part series, this commentary examines the phenomenon of internet shutdowns and considers the impact of the growing motif of internet shutdowns in Africa.

Internet shutdowns are a deliberate disruption to the internet, often by state actors, to achieve any range of purposes to which free access to the internet is deemed detrimental. As the internet evolves, they have emerged mostly due to friction between governments and decentralised actors on the internet. They are quickly becoming commonplace across the world.

In Africa, internet shutdowns take on unique implications. Considering Africa’s continuing struggles with governance and her nascent democracies, internet shutdowns in Africa are used by governments to control speech, repress opposition, cover up human rights abuse and tamper with democratic processes.

This commentary examines the phenomenon of internet shutdowns, considers the impact of the growing motif of internet shutdowns in Africa and proposes an integrated approach, based on multistakeholder ideals, to combating the issue of Internet shutdowns.

What Are Internet Shutdowns

What constitutes an internet shutdown and how to identify one in practice can be deceptively complex and far more varied than prevailing definitions indicate. This is because internet shutdowns exist on a spectrum and are not a singular, homogenous activity. It is also because internet shutdown is often referred to by different terms by different parties.

Generally, internet shutdowns are defined as the intentional disruption of internet-based communications, making them inaccessible or unavailable for a specific population, location, or type of access. They include complete blackouts (where online connectivity is fully severed), mobile service disruptions, throttling, slowing down connections, and selectively blocking certain platforms. They also include partial internet blackouts or blackouts within specific geographical locations.

Snapshot of Internet Shutdowns in Africa

Africa has become something of a hotspot for internet shutdowns. The continent’s nascent democracies, governance struggles and unique socio-economic context mean that the frictions caused by the increasing influence of the internet, especially on political issues, are heightened within the continent. In 2021, Africa was recorded as the most censorship-intensive region in the world, with 12 countries shutting down the internet, as the continent recorded a whopping 35 percent of all internet shutdowns in the year.

Internet shutdowns in Africa are primarily informed by states’ desire to control communication during elections, suppress political disturbances (whether real or perceived) or repress specific kinds of detrimental content. One of the very first internet shutdowns in Africa happened in 2007 when Guinea’s former president Lansana Conté ordered a shutdown following protests calling for his resignation.

Since then, perhaps compelled by the rise of social media and increasing internet penetration, an estimated 26 out of Africa’s 54 states have overseen internet shutdowns. In 2016, the Ugandan government ordered an internet shutdown during a general election remembered for violent protests and arrests of opposition candidates.

In 2020, Tanzania shut down the internet during the elections in October. In the same year, Ethiopia imposed an internet shutdown due to tensions between Abiy's government and Tigray's regional party. Other countries like Burundi, Chad, Zimbabwe, Benin, the Republic of the Congo, Niger, Uganda, Zambia, Gabon, Eritrea, Liberia, Malawi, Mauritania, Burkina Faso, Senegal, Eswatini, etc. have adopted varying degrees of internet restriction, within this period.

In 2021, Nigeria, Africa’s leading economy, recorded its first internet shutdown with the ban of Twitter which lasted over six months, following concerns around hate speech, misinformation and fake news, as well as civic disturbances stemming from regional agitation for self-governance and protests against police brutality.

Internet shutdowns in Africa are typically carried out by government orders to internet service providers (ISPs) requiring them to limit access by users whether to specific platforms (as was the case of the now notorious “Twitter Ban” in Nigeria) or the entire internet (as was the case in Uganda during the general elections in 2021).

They may also be implemented through fundamental infrastructure shutdowns (such as turning off of power grids and disablement of communications infrastructure), routing interferences, including Border Gateway Protocol route interferences and telephony routing interferences, domain name system (DNS) manipulation and deep packet inspection.

Why Internet Shutdowns?

The reasons given by various African states for internet shutdowns range from national security to public safety concerns. Often, the claim is that shutdowns are necessitated by a need to protect the public interest, prevent an undermining of constituted political structures or control hate speech, misinformation and illegal or harmful content.

Without more, these justifications are patently insufficient. While there is no denying that hate speech, disinformation, and similar negative externalities of internet activities present serious challenges for countries in Africa and around the world, internet shutdowns are condemnable for their human rights implications, authoritarian/undemocratic overtone, negative social impact, non-compliance with internet governance and digital policy standards, and ultimately, for their inefficacy in addressing any of the genuine problems.

There is evidence that the use of internet shutdowns to quell disturbances or national security issues only further accentuates them (as was the case in Egypt and Nigeria) as the propagation of illegal, harmful, or dangerous media hardly subside following shutdowns, with citizens often resorting to VPNs and other tools to evade internet blockages.

In any case, the supposed use of internet shutdowns to “preserve” democratic structures (assuming there is a genuine basis to consider that internet activities undermine democratic processes) is counterintuitive, as they are undemocratic by design and are restatements of the very issues they propose to resolve.

The truth is that these “justifications” often belie cogent ulterior motives. The real reasons for internet shutdowns often include the government's interest in (a) controlling the spread of information considered detrimental to their power, (b) effecting election malpractice and hiding voter fraud, (c) stifling dissent, (d) controlling media or (e) weakening minority groups.

Instructively, most internet shutdowns in Africa occur during or in anticipation of political events (such as elections) or political disturbances (such as protests or heavy criticism of the government) and are explored by governments to maintain control within the context of these events.

The costs of these decisions for Africa are extensive. Beyond the economic losses routinely incurred as a direct result of internet shutdowns, other repercussions include damage to commercial productivity, damage to the local digital economy, increased unemployment, loss of food security, disruption to social life and social structures and retardation of democratic participation and processes.

Regarding economic cost, African countries lost a combined $1.93 billion to internet shutdowns in 2021 alone, with Nigeria contributing the most to that total. The Cost of Internet Shutdown Report 2021 estimates the cost of the 2021 internet shutdown in Nigeria at US$1.5 billion (second only to Myanmar in the world).

Author

Vincent Okonkwo | Lead Analyst, Tech and Innovation Policy | v.o@borg.re

#234Vote: What the law says about campaign financing

2022-11-02T00:29:47+00:00

#234Vote

This analysis discusses the legal framework for regulating campaign finance in Nigeria including the limit on spending by political campaigns, the limit on spending by political parties on election expenses, the limit on contributions by individuals/entities and the limit on political contributions by corporations.

Financial contributions to political parties and candidates are an important source of political influence in many societies. Various attempts have been made around the world to manage campaign finance, with varying degrees of success.

The IDEA Database on Political Finance (Political Finance Database) shows that all of the 180 countries included use at least some form of regulation of the role of money in politics, such as bans on donations from certain sources, limits on spending and provisions for public funding.

The goal of such regulations is to prevent certain types of behaviour while creating transparency in how money is raised and spent in campaigning for elections.

The way and manner with which political parties finance their campaigns are critical in any democratic election to ensure that the election is free and fair. Without adequate campaign finance regulation, there will be an unfair advantage for parties in government over others.

By this, ruling parties could use public funds to strengthen their grip on power and increase their chances of winning the election. Also, this will lead to vote-buying using party and campaign funds which are undisclosed while threatening national security and stifling development. In general, the three main results of an inefficient system of campaign finance regulation are (1) funding from undesirable sources; (2) improper influence of the money over policy outcomes; and (3) financial barriers for average citizens vying for political office.

This analysis discusses the legal framework for regulating campaign finance in Nigeria including the limit on spending by political campaigns, the limit on spending by political parties on election expenses, the limit on contributions by individuals and entities and the limit on political contributions by corporations.

Framework Governing Campaign Finance in Nigeria

The Independent National Electoral Commission (INEC) is Nigeria’s elections management body. INEC was established within the framework of the Constitution as a permanent institutional body whose task is to oversee the Nigerian electoral system and also monitor the organisation and operation of the political parties, including their finances and to arrange for the annual examination and auditing of the funds and accounts of political parties, and publish a report on such examination and audit for public information.

The 1999 constitution is the foundation of all laws in Nigeria and is the starting point for the legal framework for campaign finance regulation in Nigeria. Section 225(1) states that this statement shall encompass an analysis of a party’s sources of funds and other assets, together with a statement of its expenditure and shall be in respect of the period 1st January to 31st December in each year. Section 226(1) of the Constitution states that INEC, shall every year prepare and submit to the National Assembly a report on the accounts and balance sheet of every political party.

INEC also has a duty to carry out such investigations as will enable it to form an opinion as to whether proper books of accounts and proper records have been kept by any political party, and if the Commission is of the opinion that proper books of accounts have not been kept by a political party, the Commission shall so report. Also, subsection 3 grants every member of the INEC a right of access at all times to the books and accounts and vouchers of all political parties. INEC is thus empowered to appoint external auditors to look into the accounts and books of political parties and parties are directed to submit to this supervision.

On 25^th February 2022, President Muhammadu Buhari signed the Electoral Act, 2022 (“The Act”) into law. The Act repeals the Electoral Act, No. 6, 2010 and is targeted at regulating the conduct of Federal, State and Area Council Elections. The act as specific legislation on elections features certain limits on campaign funding.

Limit on spending by political campaigns

Section 87 (1) of the Electoral Act, 2022 gives INEC the power to place limitations on the amount of money that can be spent by a political campaign for the different political offices in Nigeria. The limit has been raised to five billion naira (N5,000,000,000) for a candidate at a presidential election, one billion naira (N1,000,000,000) for a candidate at a governorship election, one hundred million naira (N100,000,000) for a senatorial seat and seventy million naira (N70,000,000) for a candidate for House of Representatives, thirty million naira (N30,000,000) for a State House of Assembly seat, thirty million naira (N30,000,000) for chairmanship of a Local Area Council and five million naira (N5,000, 000) for councillorship of a Local Area Council. Violation of these limits is punishable with fines of 1% of the maximum limit permitted or imprisonment of not more than 12 months or both.

It should be noted that these sums are an increase from limits placed in Section 91 of the 2010 Electoral Act which provided for one billion naira (N1,000,000,000) for presidential candidates, two hundred million naira (N200,000,000) for Governorship, forty million naira (N40,000,000) for Senate, twenty million naira (N20,000,000) for House of Representatives, ten million naira (N10,000,000) for State Assembly, ten million naira (N10,000,000) for Chairmanship of Local Government council and one million naira (N1,000,000) for Councillorship.

Limit on spending by political parties on election expenses

It should be noted that spending by political parties on election expenses is quite different from expenses incurred by the political campaign. The Electoral Act, 2022 defines election expenses as “expenses incurred by the political party within the period from the date notice is given by the Commission (INEC) to conduct an election up to and including the polling day in respect of the particular election.”

Section 89 (2) states that INEC shall determine the limit of spending on election expenses by political parties in consultation with the political parties. Any political party that exceeds this limit shall be liable to a maximum fine of N1,000,000 and forfeiture to INEC of the exceeded amount. This limit has yet to be set by INEC for the 2023 elections as of the time of this analysis.

To enforce this, all political parties are required to submit a separate audited return within six months after an election and such return shall be signed by the political party's auditors and countersigned by the Chairman of the party and be supported by a sworn affidavit by the signatories as to the correctness of its contents. This audited return shall show the amount of money expended by or on behalf of the party on election expenses, the items of expenditure and the commercial value of goods and services received for election purposes. Any failure to submit the return will result in a maximum fine for failing to submit an accurate return or a maximum fine of N200,000 for every day same is not submitted if the political party defaults.

For purposes of transparency, the political party shall also publish this report in at least two National Newspapers and the official website of the political party. Also, the Act grants INEC a right of access at all times to the audited books and accounts and vouchers of all political parties. INEC is thus empowered to appoint external auditors to look into the accounts and books of political parties and parties are directed to submit to the supervision.

Limit on contributions by individuals to campaigns and political parties

Section 87 (1) of the Electoral Act, 2022 gives INEC the power to place limitations on the amount of money or assets that an individual can contribute to a political candidate or party and demand information on such contributions. Any individual who contravenes the limit is liable to a fine of five times the excess donated amount to be paid to INEC.

The Act states that no individual or other entity shall donate more than fifty million Naira (N50, 000,000) to any candidate or political party. This was increased from the previous limit of 1 million Naira (N1, 000,000) in Section 91(9) of the Electoral Act, 2010.

In order to ensure transparency in the electoral process, the Act states unequivocally that no political party shall accept or keep in its possession any anonymous monetary or other contributions, gifts, properties, etc. from any source whatsoever. In the same vein, Section 90(3) provides that no political party shall accept any monetary or other contribution exceeding N50,000,000 unless it can identify the source of the money or other contribution to the Commission.

To enforce this, all political parties are expected to keep an account and asset book to record (a) all monetary and other forms of contributions received by the political party and (b) the names and addresses of any person or entity that contributes any money or asset which exceeds N1,000,000.

Limit on contributions by Corporations

Section 221 of the constitution states that “no association, other than a political party, shall canvass for votes for any candidate at any election or contribute to the funds of any political party or to the election expenses of any candidate at an election.” This represents a total ban on campaign donations by associations. Section 229 defines “association” as “any body of persons corporate or unincorporated who agree to act together for any commission purpose and includes an association formed for any ethnic, social, cultural, occupational, religious purpose.’

The provisions of section 43(2) of the Companies and Allied Matters Act 2020 also expressly ban contributions by any association or corporation to any candidate or political party. It should be noted that several scholars have criticized this ban as a violation of the freedom of association granted under Section 40 of the 1999 constitution.

Conclusion

Unregulated campaign financing presents certain problems for modern democracy. It fails to guarantee that candidates and political parties compete on equal terms. Political competition under unregulated political financing, according to Keith Ewing, would be like ‘inviting two people to participate in the race, with one participant turning up with a bicycle, and the other with a sports car.’ Nigerians must take notice of the latest campaign finance laws in their contributions to candidates and pollical parties.

Political parties must also comply with the provisions mandating transparency in contributions and spending. INEC must continue to be vigilant in enforcing campaign finance laws to ensure a truly free, fair and equal democratic process.

For further context, sections 88, 89, 90 and 152 of the Electoral Act are most relevant.

Olakanye Oluwatobi | Research Analyst, Fiscal Policy | o.o@borg.re

Our issue-briefs provide a platform to provide commentaries on knowledge surrounding a current relevant local or transnational discussion.

To Kill a Mockingbird: Inside Nigeria's Self-Sabotaging Approach to Technology Regulation

2022-08-01T19:40:33+00:00

The technology industry in Nigeria remains one of the most exciting in Africa, and in the world. The growth and potential shown by the technology ecosystem in Nigeria have been immense despite hostile regulation and unsavoury business conditions. We looked at Nigeria's approach to technology regulation in the past 6 years reminding the government why it is a sin to kill a mockingbird.

Published in 1960, Harper Lee’s “To Kill a Mockingbird” is one of few true classics of modern literature. The title of the book derives from an eponymous passage on page 88 where Maudie explains to Jean why it is a sin to shoot a mockingbird. She says:

“Mockingbirds don’t do one thing but make music for us to enjoy. They don’t eat up people’s gardens, don’t nest in corncribs, they don’t do one thing but sing their hearts out for us. That’s why it’s a sin to kill a mockingbird.”

The theme of the book also echoes the same message. Thematically, the book warns of the perils of destroying the things which benefit oneself and of how easily one can do just that. It is a warning that is worth retelling in the context of Nigeria’s relationship with her technology sector.

Africa's Netflix packs up

On 28 August 2020, Iroko TV, Nigeria’s premier Pay TV startup, announced it was leaving Nigeria. The effective language was “defocusing Africa growth efforts.” The reasons behind the Pay TV platform’s decision to stop expending resources in scaling in Nigeria, and Africa by extension, were all too familiar. One of the principal offenders was the then newly released 6^thedition of the Nigeria Broadcasting Code (NBC Code Amendment).

The company’s CEO, Jason Njoku, in an impassioned blog post, argued that the NBC Code Amendment was effectively destroying Pay TV in Nigeria under the pretext of competition regulation. He explicated that the amendment played a massive role in the company’s decision to refocus on other markets.

This was a company which could boast of being a true disruptor, a company on course to realizing the playbook for the Pay TV industry in Nigeria, a company tipped to be the Netflix of Africa, resigning ultimately to the avoidable fatality that is regulation in Nigeria. This is not a lone case, but it stands out for its direct casualty.

Nigeria’s approach to technology regulation, particularly in the last six years, has been troubled, to say the least. In this time, regulation has been everything from uncalculated and insufficient, to destructive. Between the taxman approach of “milking” businesses still trying to flesh out experimental business cases, to opting for dangerous misinterpretations of disruptive business models, to forestalling innovation to favour the norm, to wielding the axe on a whim; regulators and the disposition to the regulation of technology in Nigeria is fast becoming a threat to the country’s own growth.

What does data tell us?

The technology industry in Nigeria remains one of the most exciting in Africa, and in some ways, in the world. In 2019, the country surpassed South Africa as the premier technology investment destination in Africa, raking in over $747 million in venture funding according to Partech Africa and over 50% of the entire funding into tech in Africa according to WeeTracker. In 2020, Partech Africa placed venture funding into Nigeria at $307M despite the pandemic. Partech Africa reports that Nigerian companies raked in funding amounting to $1.8B in 2021, while WeeTracker has Nigerian startups raising $1.42B in funding in its 2021 report.

Make no mistake — the cost of Nigeria’s approach to technology regulation goes beyond lower ratings in high-end tech reports. The cost is paid every day, by the tech-preneurs in Nigeria, by the common masses and by Nigeria herself, in more ways than one.

However, the immense growth and potential shown by the technology ecosystem in Nigeria has been despite hostile regulation and unsavoury business conditions - and is beginning to tell. FDI Intelligence’s African Tech Ecosystems of the Future report, put Nigeria at the sixth position overall in the African Tech Ecosystems of the Future ranking for 2021. The ranking, which explores the African tech ecosystem and its potential for the future, was based on mostly qualitative indices.

Where South Africa ranked first overall in categories such as startup status, business friendliness, and economic potential, and Kenya and Egypt led in human capital and lifestyle and Foreign Direct Investment (FDI) strategy respectively, Nigeria ranked top in only one category - number of startups, the lone quantitative index, unsurprisingly. In truth, compared to other countries in Africa’s “innovation quadrangle,” Nigeria’s successes as a “tech hub" have been mostly down to two factors: the daring, adaptability, and innovative nous of Nigeria’s tech-preneurs and the country's insane market-size.

A closer look at funding reports with similar indexes, such as Briter Bridges’ report on venture funding in Africa, betrays the same fact. Briter’s 2020 report, which factored in the place of incorporation of startups operating in Africa, does not have Nigeria in its top five. According to the report, the leading destinations of incorporation of African startups which received funding in 2020 were the US, South Africa, Mauritius, the U.K and Kenya, in that order.

It is obvious why Nigeria does not make the list despite the chunk of funding received by “Nigerian startups” for the year. Considering unfriendly (and erratic) regulations, poor business realities, weak currency and tax conditions, most Nigerian startups prefer to be regulated elsewhere. One of the latest cases was one of Nigeria’s few multi-billion-naira technology businesses moving shop to Estonia towards the end of 2021, due (at least in part) to regulatory constraints.

Repercussions everywhere!

Make no mistakes about it – the cost of Nigeria’s approach to technology regulation goes beyond lower ratings in high-end tech reports. The cost is paid every day, by the tech-preneurs in Nigeria, by the common masses and by Nigeria herself, in more ways than one.

The NBC Code Amendment for instance, which had the effect of outlawing exclusive ownership of original content by creators in the broadcast space in Nigeria (amongst other things), not only factored in iROKOTV’s eventual decision to “defocus” Nigeria, but had and continues to have other far-reaching implications for Nigeria and Nigerians, in terms of depreciation of Nigeria’s investment appeal in the Pay TV space, the resultant loss of jobs, negative disruption to other wealth generation channels based off thriving Pay TV etc.

Of Bans, Motorcycles and Taxes

Elsewhere, the incredible and ill-considered ban on motorcycles in Lagos had grave implications for motorcycle-based ride-hailing businesses in Nigeria (with the likes of Gokada and O-Ride having the worse of it), on employment, in terms of revenue lost, and on everyday business commuting for the common man, amongst others.

And if in a way, the ban inadvertently led to an increase in activities in the logistic-tech business ecosystem in Nigeria - that too, is currently threatened by the remarkably obscure Courier and Logistics Services (Operations) Regulations, which establishes NIPOST (yes, they are still alive) as the regulator of the logistics industry and portends a similar fate for logistic-tech business as an earlier regulation of 2020 by the same name, increased licensing fees for logistics operators and required logistics companies to remit 2% of their revenue to the NIPOST.

Elsewhere, leaks from the National Information Technology Development Agency’s (NITDA) proposed amendment to the NITDA Act propose levies of 1% of profit before tax for technology companies with an annual turnover of N100 million, amongst other fines, as well as the prospects of imprisonment for players in the technology ecosystem.

The Art of (Regulatory) War

While recent upheavals in the invest-tech space in Nigeria following the SEC’s implied “ban” on the offering of foreign security to Nigerians appear to have been somewhat resolved by the SEC’s amendments to their Consolidated Rules and Regulations and the proposed Rules on Digital (Robo) Advisory Services, the cost of that guns-blazing, shoot-first-talk-later approach to regulation counts in investor and customer confidence, if nothing else.

These are not lightly regained and matter much for disruptive businesses. Not that it matters too much to the CBN, who after the SEC created a digital sub-broker licensing regime to enable players in the industry to operate within its regulatory remit, obtained an exparte o\rder to freeze the accounts of various invest-tech platforms, including RiseVest, Bamboo, Chaka and Trove for 180 days. The CBN’s concern is that these startups operated without a license as asset management companies “and utilized FX sourced from the Nigerian FX market for purchasing foreign bonds/shares in contravention of a CBN circular which instructed otherwise.”

According to the CBN, the exparte order was further necessitated by the fact that the foreign exchange deals done with the startups were part of what was making the Naira weaker than the United States dollars. Between the under-noted illegality of an exparte order lasting for 180 days and the sheer incredulousness of both the CBN’s gung-ho approach to whatever the actual problem is, there is just enough room for resumed worry about the overall implication of moves like this on Nigeria’s already severely whittled investment appeal, amongst other urgent concerns.

CBN and a non-guide to witch-hunting Crypto

Of course, the costs of vacillations such as that which happened between the SEC and CBN in respect of crypto-assets between late 2020 and early 2021 may be harder to calculate. But if there are doubts as to whether the SEC’s tax-man-like classification of all crypto assets as securities (until proven otherwise) had any direct implications on the technology ecosystem (before it was compulsorily suspended), there is no questioning whether CBN’s subsequent outlawry of “facilitation of payments for crypto exchanges'' by banks has cost the country.

Whether it is in terms of the missed opportunity to capitalise on Nigeria’s station as the biggest market for cryptocurrency in Africa (second largest in the world) or; in terms of money lost by players in the cryptocurrency space, or in terms of the forfeited potential revenue from regulation and perhaps taxation of cryptocurrency, or in terms of the resultant compound mistrust, which is limiting the acceptance and growth of crypto-assets in Nigeria, the answer to the question is obvious.

the ban costs Nigeria over 2 billion Naira daily

What is even more confounding with this specific howler was that it went contrary to the SEC’s stance on regulating crypto-assets, the tenor of the National Blockchain Adoption Strategy released by NITDA and even the CBN’s own much-advertised policy on driving financial inclusion through digitisation, evidencing a lack of cohesion in regulatory decision-making amongst different regulators interacting with the technology ecosystem in Nigeria and offering further indictment on Nigeria's directionless approach to technology regulation.

A Twitter Ban

Another in a litany of government/regulator decisions costing the technology industry in Nigeria was the recent ban of Twitter. This decision deserves a place as the most shocking in an ever-growing catalogue, as it was neither based on the desire to drive revenue nor an intention to protect existing structures nor does it come from a place of misunderstanding.

This one was, apparently, a reaction to an annoyance within the Presidency. For this, the consequences have slightly more clear numbers. Paradigm HQ reports that the ban costs Nigeria over 2 billion Naira daily, going by estimates from Netblock’s Cost of Shutdown Tool. The approximation is that Nigeria lost no less than tens of a hundred billion at the end of this debacle.

The ban costs commercial productivity, which led to increased unemployment, and further harmed Nigeria’s FDI appeal, weighed on the digital economy (which is one of few sectors still “thriving”), in addition to heavily impacting MSMEs, e-commerce platforms and other internet entrepreneurs who rely on Twitter’s micro-blogging magic to push sales and to operate a business.

A Policy Response to a Policy Problem

Nigeria’s plentiful faux pas in technology regulation tell of a larger failure – one of a lack of a clear technology policy and/or absence of a thoughtful developmental policy. More so, it betrays a disinterest on the part of the government to enable her most promising industry (and no, it is not the oil). It should be of priority for a country such as Nigeria, whose economy is greatly impacted by the booming business of technology, to craft a clear policy or approach, applicable across the board and instructive to all regulators, which will inform her attitude to regulating technology and technology-based businesses, tell in her investment into technology and technology infrastructure, and guide her interaction with technological globalisation.

The unwritten policy of the US, for example, is one to follow and can be glimpsed, for example, in some of the thoughts of former Commissioner Hester M. Peirce in a number of notable speeches. In “Beaches and Bitcoin: Remarks before the Medici Conference” for instance, she noted that the role of regulators is to protect investors and market integrity without losing sight of the benefits of new technology, while learning, adjusting and adopting innovative approaches to regulation along the way, to enable sustainable growth.

The US’s technology policy is evident in the country’s persistent investment in technology, whether through infrastructure, innovative regulation or education. The same clarity of purpose is apparent in the approach of forward-thinking economies like that of China, the UK, Canada and Germany, to varying degrees. In Africa, countries like South Africa, Ghana, Egypt and even Botswana seem to understand the stakes better and are hurriedly adopting pro-technology policies and crafting clear roadmaps to capitalise on the shared economy of innovation.

The Nigerian Startup Bill: A silver lining?

There is some hope that the Nigerian Startup Bill (NSB) is a move in the right direction and might kick-start a new regime for technology in Nigeria. The NBS, should it pass into law, will hope to harmonise the workings of the plethora of regulators interacting with Nigeria’s startup ecosystem and ensure that they are all positively aligned on a forward vision for the Nigerian tech startup ecosystem while updating outdated laws touching on the technology industry. There is a lot of hope resting on the NBS, but yet again, if precedence is instructive, as with most things Nigerian, there is every sense in keeping excitement minimal.

Whatever happens with the NBS, there is every need to recalibrate what is becoming a self-defeating approach to the business of technology in Nigeria. Tech regulators in Nigeria need to start getting it right fast - if not for the sake of the country today, but for the sake of the country’s future.

In the world today, technology and technology-based business models are revolutionizing business and driving upward economic growth. But where the current boom is remarkable for its wealth generation potential in more advanced countries, for Nigeria, especially for her younger generation, it is a lifeline – we must do everything to seize this lifeline.

If Nigeria must get it right, it will have to reconsider its approach to technology regulation and develop and implement a clear policy towards technology and technological development. While Nigerians are often forced to do things for themselves, as heartbreaking as it is, this is one thing the government will have to do for the people. On our part as Nigerians, then, like Mrs. Maudie, we will have to find a way to remind the government why it is a sin to kill a mockingbird.

Author

Vincent Okonkwo | Lead Analyst, Tech and Innovation Policy | v.o@borg.re

Weighing the Impacts of Renewable Energy Integration on Nigeria’s Power Sector

2022-06-16T02:00:25+00:00

Energy Policy

Globally, the power sector is one of the largest sources of carbon emissions. Specifically, about 14.8% of Nigeria’s carbon emissions emanate from the sector. We look at the possible effects of renewable energy integration on the Nigerian power sector and some policy options to consider.

Over the past decade, climatic disruptions have become commonplace. Across many continents, severe floods and bouts of desertification have significantly hampered the prospects of attaining sustainable development. This situation has triggered an urgent global drive to overhaul the current fossil fuel dependency. In many national economies, this global drive has been directed towards the power sector— and for a good reason.

The power sector is one of the largest sources of global carbon emissions, and it also has the ability to absorb large-scale renewable energy sources. For instance, about 14.8% of Nigeria’s carbon emissions emanate from the power sector. Essentially, the power sector is the most strategic route for reducing carbon emissions and integrating renewable energy. Already, in countries like Denmark, the share of renewable energy in the annual electricity generation has been increased to about 58 per cent.

Like Denmark, Nigeria has joined the bandwagon of electricity-focused renewable energy integration. In recent years, the government has released several objectives to increase the share of renewable energy in the power sector. For example, through the Renewable Energy Master Plan (REMP), Nigeria has set a target to increase the share of renewable energy in electricity generation to 36 per cent by 2030. However, whilst the quest to reduce fossil fuel usage is undoubtedly beneficial, it raises significant questions on the possible effects of such a fundamental transition on a developing country like Nigeria.

Possible Effects of Renewable Energy Integration On the Nigerian Power Sector

Given that the crux of renewable energy integration is a fundamental change in the energy mix, it is expected that the fuel mix that currently underpins the Nigerian power sector is set to change. Thus, carbon-intensive energy sources like oil and coal, which constitute about 50 per cent of Nigeria's power generation, will continually be phased out. In contrast, renewable energy generation will take the central stage.

Aside from this, an increase in renewable energy integration would result in significant infrastructural expansions within the Nigerian power sector. Unlike conventional energy sources, renewable generation assets can only be located where the resources are available. This often creates a considerable distance between the source of generation and the demand pool. To cater to this scenario, significant investments would have to be directed towards strengthening the transmission network and conducting system upgrades to accommodate additional power injection on the grid.

Structural disruption is another crucial impact that renewable energy integration could have on the Nigerian power sector. As the share of renewables increases, the Nigerian power sector will become more decentralised. Off-grid solutions will increasingly be deployed, and energy storage could become more prevalent. Most importantly, demand-side participation would increase as more households will continually generate their power through solar photovoltaic (PV) installations.

Already, Nigeria's solar energy capacity has been pegged at 28 megawatts, with projections that it will tower at 8 gigawatts by 2030. This structural change will create novel market conditions that could occasion a fundamental change in Nigeria’s electricity market design. For instance, an increase in demand-side participation would reduce the revenue of Nigerian distribution companies (Discos). This is because the concept of demand-side participation is hinged on households and commercial entities who are ordinarily customers of discos— generating power on their own. This would inevitably lead to significant revenue losses for distribution companies since tariffs are mostly usage-based.

Lastly, the integration of renewable energy could pose significant operational challenges to the grid. Given that renewable energy sources like solar and wind power are often weather-dependent, on-grid renewable energy integration would increase the need to seek alternative energy sources to make up for weather-induced generation shortfalls. In this scenario, Nigeria's system operator would have to adopt new grid operation procedures to mitigate supply inadequacies of renewable energy. Spain is a case in point. Since it attained a renewable generation of about 24 per cent, it has had to deal with persistent grid instability, which has necessitated the use of natural gas as a backup generation resource.

While these impacts are undoubtedly significant, Nigeria’s power sector is expected to face a greater challenge in its quest for renewable energy integration. This challenge is tied to the sector’s illiquidity.

The Power Sector’s Illiquidity Problem

The current illiquidity of the power sector could pose a challenge to renewable energy companies. For example, in 2020, it was reported that the Nigeria Bulk Electricity Trading Plc (NBET) owed power generation companies to the tune of one trillion naira. This severe illiquidity becomes even more prominent within the context of Renewable Purchase Obligations (RPOs) mandated by the Feed-in Tariff Regulations. Under the regulation, distribution companies must purchase 50 per cent of the stipulated renewable energy capacity, while the NBET is mandated to purchase the other 50 per cent. The sector's illiquidity significantly increases off-taker risk, as the NBET is hardly capable of paying renewable generators for power produced.

This consequence is currently playing out in India. Without tackling the illiquidity within its power sector, India mandated its distribution companies to purchase power from renewable generators. The policy backfired. By April 2021, Indian distribution companies had owed renewable generators to the tune of ₹113.34 billion (approximately 565 billion naira). This bolsters the fact that solving the power sector's liquidity crisis is a prerequisite for the successful integration of renewable energy.

Policy Options for The Way Forward

Passage of The Electricity Bill

The recently proposed Electricity Bill needs to be passed to successfully integrate renewable energy into Nigeria's power sector. The Bill provides a substantially strong structure for conventional and renewable energy sources to thrive within the power sector. It also expands the electricity market to accommodate renewable energy participants and prescribes comprehensive fiscal incentives for renewable energy players. This legal certainty will significantly de-risk the investment climate in the renewable energy sub-sector, thereby, increasing renewable energy adoption.

High-Quality Distribution Services

For distribution companies to maintain profitability in the face of the impending evolution of Nigeria’s electricity market, quality assurance has to be prioritised. While distributed generation will undoubtedly continue to increase, the intermittency of renewable energy connotes that households and commercial entities will still require conventional on-grid power. Essentially, a significant opportunity exists for distribution companies to maintain revenue generation by adopting a business model centred on providing quality and reliable power to customers. This can be achieved by increasing capital infusion to expand the distribution network and strengthening operational capacity to reduce load rejections.

Unbundling The Transmission Company of Nigeria (TCN)

Nigeria's transmission company's unbundling is particularly significant for two reasons. First, as earlier stated, on-grid renewable energy generation would require substantial expansion of Nigeria’s transmission infrastructure. Second, on the commercial side, Nigeria needs a system and market operator that would be able to forecast power generation, balance demand-supply dynamics, and efficiently control the market even in the face of evolving market conditions. Evidently, strong institutions are needed to carry out these functions on both fronts. However, due to the government ownership of the TCN, the transmission and market operations have been largely inefficient. Unbundling the TCN would create separate and efficient institutions to strengthen the power transmission network and scale renewable energy integration in the electricity market.

Resolving The Liquidity Crunch Through Cost-Reflective Tariffs and Mass Metering

To resolve Nigeria’s liquidity crunch and encourage renewable energy uptake within the power sector, the collection losses of distribution companies have to be considerably reduced. This can be achieved by increasing metering rates to expand the scope of tariff collection and adopting cost-reflective tariffs to ensure profitability. Reviewing the Multi-Year Tariff Order (MYTO) to accommodate cogent costs like frequency deviations and changes in exchange rates would be beneficial. Similarly, the current metering rate can be increased by easing the metering application process under the Meter Asset Provider scheme. This way, more customers can be incentivised to obtain electricity meters at their own cost.

Conclusion

The global energy transition has catalysed a paradigm shift in numerous power systems across the globe. As the evolution continues, national stakeholders need to prioritise the adaptation of their power systems to changing market conditions. More specifically, it depicts the need for Nigeria to adopt strategic policies directed at optimising the opportunities and addressing the challenges that may arise with integrating renewable energy into the power sector.

Author

Oyin Komolafe | Research Analyst, Energy | k.o@borg.re

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualify as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92022 borg. Legal & Policy Research

Sidelined: Africa is Insecure.

2022-06-13T17:13:21+00:00

An offshoot of the Russian invasion has been that the many dimensions of insecurity in Africa have been laid bare. In our third instalment on the Russo-Ukraine conflict, this section will address the effects of the conflict on various dimensions of security within the continent.

Russia’s invasion of Ukraine has plunged the global food markets into turmoil with developing countries bearing the brunt of the damage. This is partly because the Russian Federation and its satellite state Belarus both control about 23% of global fertiliser exports thereby having a significant impact on the ability of farmers in Africa to grow food crops in their countries.

Moreover, Russia (33.5 mt) and Ukraine (24 mt) collectively account for 30% of the world’s wheat, 50% of sunflower oil and 20% of the global maize markets respectively. Russia’s blockade of several Ukrainian ports, coupled with the energy crisis has torpedoed supplies of these agricultural products to the several African countries that rely on them.

In 2020, Russian exports of agricultural products to Africa totalled $4 billion and Ukraine received $2.9 billion in same. However, the decrease in their supply has caused food prices to skyrocket with the FAO Food Price Index averaging 158.5 points in April 2022, down 1.2 points (0.8 percent) from the all-time high reached in March but still 29.8% higher than prices in April last year.

Moreover, the crisis has seen several states move to protect their citizens by restricting exports of staples from their countries. The belligerents, Russia and Ukraine have themselves imposed a ban on exports of wheat and sugar with India and Kazakhstan replicating the ban on wheat exports and Kosovo and Algeria doing the same with sugar. Russia has further imposed quantitative restrictions on sunflower oil. Argentina has similarly placed bans on beef and soybean meal and soybean oil. For their part, Indonesia, the world’s largest exporter of edible oil has banned exports of palm oil to drive down the oil price on domestic markets.

What has ensued in Africa as a result, is an abrupt increase in the price of staples such as wheat and a corresponding increase in the foods which these products make such as bread. Even before the crisis, the average African household spent about 40% of its income on food, compared to just 17% in developed economies. Russia’s war in Ukraine, coupled with other endemic pressures such as “multiyear droughts in the Horn and East Africa; a locust swarm; the internal conflict in Ethiopia; flood, drought, conflict and the economic effects of COVID-19 in West Africa;” threatens to put 44 million people in 38 countries in hunger, most of these people being vulnerable populations in Africa and the Middle East.

In the context of military security, Russia has expanded its influence within the region by entering strategic military alliances with some 28 African states. In some cases, the Kremlin has capitalised on tense relations between African countries and Western powers to expand their influence within the region. One such case is Russia’s supply of military equipment, training and technology to Nigerian forces following Washington’s inertia to execute a $1 billion weapons sale to the Buhari administration after allegations of human rights abuses by the administration both in its fight against Boko Haram and against its own people during the #ENDSARS protests.

Similarly, the Ethiopian government turned to the Kremlin to sign a military cooperation agreement in July last year when it believed the United States had taken sides with Egypt in the dispute over Ethiopia’s Grand Renaissance Dam and after the accusation of US Secretary of State, Anthony Blinken that the Abiy-led administration had pursued a policy of ethnic cleansing in Tigray.

The Western and Central Africa regions have suffered regime insecurity in recent times with successful coups being recorded in Mali, Guinea and Chad over the last year and in Burkina-Faso in January this year. In these times, Russian-backed paramilitary forces (this is strongly denied by the Kremlin), the Wagner group has positioned itself as an additional layer of support to staggered regimes lending direct support to the Libyan and the CAR governments. In Mali, the military junta, having suffered trade sanctions from the sub-regional trade bloc, ECOWAS, and by driving French forces out of the country has had to court the support of the Wagner group to assist it in its embittered battle with jihadist forces within the country.

Of additional concern is the potential for weapons supplied to Ukraine to find their way into Africa further deepening Africa’s security woes. Whiles Russia has been responsible for 39% of arms imports in Africa, Ukraine has gained itself a reputation for being a “supermarket” of illegal arms. Due to weak protocols on gun possession largely as a result of volunteers being engaged in Ukrainian forces to fight in the Donbas region, some weapons are smuggled out of the country through the Middle East into other parts of the world.

In 2017, the Organized Crime and Corruption Reporting Project (OCCRP) uncovered a weapons laundering scheme where Ukrinmash, a Ukrainian state arms exporter, laundered 59 amphibian armoured patrol vehicles originating from Poland through Ukraine to buyers in Burundi and Uganda via the United Arab Emirates. This is not without precedent. Between 1992 and 1998, it was estimated that Ukraine had lost $32 billion in military assets which it had inherited from the Soviet Union due to lapses in oversight, theft and discount sales.

These assets found their way into hotspots such as Croatia and Sierra Leone with Ukraine and Bulgaria being linked to a UN investigation into illicit arms trading in the case of Sierra Leone. Understandably, the massive Western support in light and heavy weapons to Ukraine to defend themselves from Russian aggression has renewed fears that some of these weapons may find their way into the continent in the aftermath of the conflict and worsen the already fragile security situation in Africa.

Neither West nor East

The pandemic, coupled with Russia’s invasion of Ukraine, has taught African governments a difficult lesson about the need to develop more sophisticated and resilient systems to better insulate our economies from the brunt of economic catastrophes, which appear to occur more frequently. Against this backdrop, the priority of African governments in the Russo-Ukrainian conflict should be to prevent a war of attrition and seek a quick end to the conflict, one way or another, as a return to normalcy in international trade provides the best shot of easing the economic situations in their countries.

To that extent, while many African countries may sympathise with Ukraine being bullied by a larger power, they will resist temptations to draw the ire of the Russian Federation as this will only serve to exacerbate the conflict and destroy economic and military relationships to their own detriment. In this conflict, perhaps “citizen and sovereign interests” demand that Africa remains content with a position at the peripheries.

You can read our first part here and the second part here

Author

Sam Kwadwo Owusu-Ansah | Lead Research Analyst, Transnational Policy | s.o@borg.re

Sidelined: Energy and the money side of things

2022-06-07T16:26:40+00:00

Energy is often credited with shaping human civilisation. In the second instalment of our series on the Russian invasion, we discuss the energy implications of the conflict in an energy reliant globe and how it has shaped Africa’s response to same.

Our ancestors’ discovery of a means to control fire several millennia ago was inarguably one of the more momentous occasions in the history of our species. The discovery of fire marked the recognition of mankind that we could manipulate elements which existed in nature to serve as a supplementary source of energy to the food which activated our manpower and girded the foundations of civilisation.

Since then, coal’s powering of the industrial revolution has cemented the marriage between energy use and economic growth and the status of energy as the “only [truly] universal currency” in an increasingly globalised financial system.

Now, whiles efforts are rife to decouple energy consumption from economic growth (a rather imprecise description for a push to use less energy in production), these efforts are a work in progress in developed countries and largely an afterthought in Africa where the priority remains ensuring continent-wide access to affordable energy. In this context of an energy reliant globe, it is important to note the countries that produce the dominant types of energy used i.e. fossil fuels, where the fossil fuels produced are used and the extent to which these fuels are used elsewhere.

The answers to these questions are crucial as they provide insight into the economic situation of these countries and importantly the impact of their fuels to other economies as this has enormous political consequences for the countries involved and to a broader extent, the international order. It just so happens that the Russian Federation is one of the largest producers and exporters of oil and gas and the Kremlin has been eager to cash in on every ounce of political leverage their position offers them.

As the third largest producer of petroleum (behind the United States and Saudi Arabia) and the second largest producer of natural gas (behind the United States), Russia has been long identified as an “energy superpower”. However, unlike the United States where a majority of fuels produced goes to domestic consumption, Russia exports energy in very large quantities. To wit, of the 9.9 million barrels of crude oil produced per day in 2020 by Russian companies, almost 5 million b/d was exported to other economies notably in Europe (48%) and Asia/Oceania (42%).

Similarly, over 7 trillion cubic feet (Tcf) of the 22.5 Tcf dry natural gas Russia produced was used largely in Europe (72%). As a result, the economy of the European Union depends on Russia for 40% of its natural gas and over 25% of its crude oil.

Whereas Russia’s annexation of Crimea in 2014 stressed the need for the EU to reduce its dependence on Russian energy, the Union failed to sufficiently wean itself off Russian oil and gas before Russia’s invasion of Ukraine. The European Union has therefore been placed in an uncomfortable situation, having to on the one hand, unequivocally condemn the actions of the Kremlin and on the other hand, continue to use Russian energy to power their factories and warm their homes.

Unfortunately, whiles rising oil energy prices have provided a boon to oil exporting economies, Sub-Saharan Africa has largely been unable to capitalise on the spike

In effect, the EU has joined forces with the United States and other G7 countries to collectively revoke Russia’s Most Favoured Nation status which exposes Russia to higher tariffs and severe quantitative restrictions on imports in those countries. The EU has further imposed no less than five rounds of sanctions against the Russian state, virtually all sectors of the Russian economy and targeted individual sanctions on prominent members of the government including President Putin and Foreign Minister Sergei Lavrov.

In addition to the aforementioned Temporary Protection Directive, The Union has additionally entertained calls for “a new special procedure” to accelerate Ukraine’s accession to the EU and has since sent the EU membership questionnaire to Ukraine which in turn submitted the final part of same to the EU Commission on 9th May, 2022. Even Germany, a recipient of 16% of Russia’s petroleum exports and 11% of its dry natural gas, has indefinitely suspended the certification of the Nord Stream II pipeline, a second pipeline which directly connects Russian gas to Germany without recourse to transit pipelines in Ukraine and Belarus.

Nonetheless, the Union continues to buy Russia’s energy and has sent contradictory messages on its short-term intentions for same. The EU currently faces strong internal opposition from countries like Hungary over a proposal to place a total embargo on Russian oil within six months. Moreover, after a two-month standoff, the EU has acquiesced on its position barring European companies from buying Russian gas in roubles thereby undermining its own sanctions on Russian banks. In effect, Europe is propping up the value of the Russian rouble and providing a daily 1billion USD to fund the Kremlin’s war effort in Ukraine, the same war Africa is said to have been mute about.

This has played out against the backdrop of an international energy crisis which has seen a dizzying surge in the price of crude oil all over the world. Even before the invasion, strong demand for oil occasioned by a strong economic rebound from the pandemic caused inflation in the price of crude oil, stoking fears that will brent will exceed the $100/b threshold during the first quarter of 2022, well beyond the US Energy Information Administration’s projection of $66.64/b for the year.

Within days of the invasion, this fear was realised and by March 8, the price of brent had spiked to $133/b, the highest since before the 2014 oil price crash. The impact of these spikes has been so massive that it has catapulted the Saudi Arabian state-owned energy giants, Saudi Aramco, over Apple as the world’s most valuable company with a market cap of about $2.4 Trillion.

Unfortunately, whiles rising oil energy prices have provided a boon to oil-exporting economies, Sub-Saharan Africa has largely been unable to capitalise on the spike, despite being a historical exporter of fossil fuels which accounts for 48.5% of total exports from the region between 1995 and 2018. This has been due to a myriad of factors including an inability on the part of African energy producers to scale up production to fill the vacuum, despite producing almost exclusively for exports, due to deficits in their production capacity.

Additionally, owing to substantial foreign ownership of energy sources in the region, this boon has neither ramped up the revenue of regional governments. The effect has been importers spending a considerable expense on fuel imports, a cost which has been passed on to consumers. Expectedly, the high cost of fuel has reflected in a corresponding increase in the price of food and utility costs spurring a cost-of-living crisis in the region.

Ghana has been hit particularly hard in this respect. Despite recording a rebound of 5.4% in GDP growth in 2021 from the meagre 0.4% in 2020, the Nana Akufo-Addo led government contends with a cost of living crisis triggered by a spike in fuel prices which stands at GHS 9.8 in May 2022 from GHS 6.1 at the same time last year. With inflation standing at an 18-year high of 23.6%, the Cedi has heavily depreciated against the US Dollar reflecting the bloated cost of everyday items. This, coupled with a recently implemented Electronic Levy on all electronic transactions has caused substantial unease to the Ghanaian populace.

Similarly, the Nigerian government has been forced to inject over 4 trillion Naira in fuel subsidies. In April, President Muhammadu Buhari announced that the cost of the petrol subsidy, which was projected to cost 443 billion naira, was to be increased ten-fold to maintain the pump price of 162.5 naira. Whiles this has, to some extent, allayed the sharp increase in the cost of living seen elsewhere within the region, it calls into question the administration’s plans for fiscal consolidation given the budget deficit is projected to amount to some 4% of GDP and the country expects a drop in government revenue following a projected lower crude output this year.

The above mirrors the continental response to the cost-of-living crisis with some governments adopting austerity measures to bring inflation under control and others taking on additional debt to provide some respite to their citizens in an already heavily indebted continent. Whichever strategy these countries opt for, their responses cannot be sustained in the face of a drawn-out conflict. For African economies ravaged by the twin catastrophes of Covid and conflict, the best chance at returning to a semblance of normalcy appears to be to stay out of the way and let the conflict take its course, whichever way that is.

You can read our first part here

Author

Sam Kwadwo Owusu-Ansah | Lead Research Analyst, Transnational Policy | s.o@borg.re

Sidelined: Africa navigating an order in flux from the peripheries.

2022-06-03T17:19:32+00:00

As tension between Russia and Ukraine continues, some strategic steps have been taken globally to address the situation. Continuing with our Russo-Ukraine conflict series, this is the first in three (3) series which analyses the veracity of the claim that African countries have failed to take a definite stand against Russia's military operations in Ukraine and provides some context regarding Africa's approach to conflict.

Her gaze is steadily fixed, a black woman gapes in awe at the item in her grip, as if dazed by its existence. The item is a Kalashnikov rifle, and our subject is an unidentified visitor to the Russia-Africa Summit held in 2019. With this as its featured image, the ensuing Associated Press article makes the claim that “Africa [has been] mostly quiet amid widespread condemnation of Russia”.

The article, the latest in a flock of Western media reports, argues that many African countries have failed to take a definite stand against Russia’s so-called “strategic military operation” in Ukraine. This paper will first interrogate the veracity of that claim and will subsequently examine the rationale behind Africa’s approach to the conflict.

A Muted Response?

These claims have largely been based on isolated remarks by some African leaders and figures close to them. For instance, many sources have referenced Ugandan President Yoweri Museveni’s comments that the Russian invasion should be seen in the context of Moscow being the centre of gravity in Eastern Europe as evidence of African support for Russia. Much still has been made of a tweet by his son, Lt. Gen. Muhoozi Kainerugaba who ostensibly expressed his support of the Kremlin’s actions.

Nonetheless, the broader African response, to the extent that such a categorisation can be made, has been far less incendiary and has in fact been complementary to the position of the West on this matter. Evidently, the joint statement by the African Union and the AU Commission on the day of the invasion demanded that the Russian Federation “imperatively respect international law, the territorial integrity and national sovereignty of Ukraine”.

Moreover, the majority of African states have upheld this position in the United Nations. In the wake of the invasion, the United States and Albania co-sponsored a draft resolution in the Security Council which called for the immediate cessation of Russian military operations in Ukraine. Contrary to the claim of inertia, all three African representatives on the Security Council: Gabon, Ghana and Kenya numbered part of the 11 countries who voted for the adoption of the resolution with China, India and the United Arab Emirates abstaining and Russia expectedly exercising its veto power to kill the resolution.

The picture subsequently painted at the Emergency Special Session of the General Assembly however fell short of the united front Africa showed at the Security Council. Of the 141 who voted to adopt UNGA Resolution ES-11/1 (A/RES/ES-11/1) of 2 March 2022, which called out Russia and Belarus for acts of aggression in Ukraine and demanded the immediate withdrawal of troops from Ukraine and the reversal of the Kremlin’s decision to recognise self-declared People's Republics of Donetsk and Luhansk, 28 of the 54 African countries voted in favour of the resolution, 17 countries abstained, a further 8 were absent and Eritrea was the sole African country to vote against the resolution.

Further, following continued Russian operations in Ukraine, Resolution ES-11/2 (A/RES/ES-11/2) was adopted on 24 March 2022 reiterating the demands of the previous Resolution ES-11/1 and calling for the protection of civilians notably students who were fleeing the conflict. All African countries held their ground save Togo which abstained after previously being absent. It was only at the introduction of Resolution ES-11/3 (A/RES/ES-11/3), which stripped the Russian Federation of its seat in the Human Rights Council, that the resolve of African countries began to falter with notably Egypt, Ghana, Kenya and Nigeria, who had voted in favour of the two preceding resolutions, switching to abstinence with Gabon voting against ES 11-3.

Ukraine has recently become an attractive destination for foreign university students due to its European standard education at relatively lower costs. It is estimated that about a quarter of the 80,470 foreign students enrolled in universities across the country are African"

Admittedly, Africa’s showing at the United Nations does not match up to the aspirations of a bloc that aspires to be a bastion for global peace and stability. Yet, the inability of Africa to present a united front on this matter should not be misinterpreted as a lack of interest in advocating for rights or, as the US Defence Department’s Africa Center for Strategic Studies claims, that “African citizen and sovereign interests have given way to Russian priorities”. Instead, one must look to how the invasion has impacted the continent, jointly and severally, to understand the reticence of African countries to take drastic measures in the wake of the conflict.

Brown Eyes, Coarse Hair

Gifty Naana Mensah, a 23-year-old Ghanaian medical student, had been studying in Ternopil, Western Ukraine for five years with no trouble. It was only when Gifty was fleeing Ternopil for the Polish border in the aftermath of Russia’s attacks that she was made to understand the worth of her African life when juxtaposed to others. She reports being stranded on the Ukrainian side of the border for two days on little water and no food and being denied entry into Poland by Ukrainian border officials who allowed Ukrainian citizens to pass freely. Gifty’s story is only one of the tales of horror told by many an African and Asian student fleeing the conflict in Ukraine.

Ukraine has recently become an attractive destination for foreign university students due to its European standard education at relatively lower costs. It is estimated that about a quarter of the 80,470 foreign students enrolled in universities across the country are African with Nigeria, Morocco and Egypt accounting for some 16,111 students. From stories of physical abuse to those of being trapped in the biting cold for days, the plight of the African students fleeing the conflict has been deplorable. The BBC reports that in the run-up to the conflict, several Ukrainian universities declined the request of African students to move their classes virtual to enable them to leave the country and threatened punitive action should the students leave.

Unfortunately, despite the continuous patronage of African students in Ukrainian universities, allegations of systemic racism against Black students are rife and predate Russia’s invasion. The treatment of African students came to a head in 2011 when a Nigerian student, Olaolu Sunkanmi Femi, was arrested and detained for months without a fair trial on charges of attempted murder after he defended himself and a friend from a racist attack by five Ukrainians. His prolonged detention spurred protests across the country and brought renewed attention to the racist treatment of immigrants in Ukraine which had previously drawn condemnation from UNHCR.

More recently, the narrative surrounding the invasion itself and the mass exodus of Ukrainians into neighbouring countries has itself been marred by racial undertones. After the invasion, several news reporters expressed shock that Russia had invaded a “relatively civilised, relatively European country…where you wouldn’t expect that or hope that it’s going to happen” and “not a developing third-world nation”. This suggests that conflict and its ramifications are somehow endemic to Africa and the Middle East, despite being ahistorical, has prominently influenced the response to the crises, particularly when it comes to refugees.

The UNHCR estimates that some 6.2 million people have fled Ukraine since the start of the conflict making it the biggest refugee crisis anywhere since the Second World War. Yet, the reactions from neighbouring European countries to Ukrainian refugees have been markedly different to that of refugees fleeing crises elsewhere. In the immediate aftermath of the invasion, the European Union scrambled to implement a hitherto unused Temporary Protection Directive which exempts Ukrainian refugees from standard EU asylum protocols and virtually bestows European citizenship rights upon them for up to 3 years. Even Hungary’s nationalist president, Victor Orban, has relaxed his hard-line approach to immigration and has opened the country’s borders to over 600,000 Ukrainian refugees, distinguishing these “refugees” from migrants, who he has previously referred to as poison.

In view of the above, the priority of African governments has been to get their citizens who have been embroiled in this conflict to safety and to figure out what steps to take for the continuation of their studies elsewhere. This has meant that African countries have been cautious not to make any rash decisions which could draw the ire of Russia since there are almost 10,000 more African students in Russia than they were in Ukraine before the crisis especially when opportunities available for Ukrainian refugee students to continue their education in third countries are not extended to African students as well.

Author

Sam Kwadwo Owusu-Ansah | Lead Analyst, Foreign Policy | s.o@borg.re

Are We There Yet? 3rd Year Review of Nigeria's Journey in Data Protection

2022-05-31T21:03:49+00:00

Tech Policy

In the wake of global developments in data protection compelled by the internet information explosion and jump-started by the promulgation of the GDPR, Nigeria also embarked on her response project, with the Nigeria Data Protection Regulation (NDPR), released by the National Information Technology Development Agency (NITDA) on the 25th of January 2019, setting the course for a new dispensation for privacy in Nigeria.

The NDPR which regulates the processing of personal data belonging to Nigerian citizens and residents in Nigeria solidified a much-needed data protection framework for Africa’s biggest economy. The Regulation effectively standardised what has hitherto been a largely inchoate framework on data protection constituted by: (a) section 37 of the Constitution of the Federal Republic of Nigeria which guarantees a right to privacy; (b) the NITDA Guidelines on Data Protection of 2013; (c) sparing provisions in the Child Rights Act of 2003; (d) data use exceptions contained in the Freedom of Information Act, 2011; and (e) privacy-related provisions in the Cybercrimes Act, 2011 and the Consumer Code of Practice Regulations, 2007.

This thinking chronicles Nigeria's journey in data protection over the past three (3) years; it addresses the highpoints, the lowpoints, the controversies and prospects for growth, and what the future might look like for data protection in Nigeria.

Download the full Insight here

Vincent Okonkwo | Lead Research Analyst, Tech and Innovation Policy | v.o@borg.re

Evil’s soft first touches or a Beginner's guide to Post-Cold War Cold War

2022-03-20T11:28:08+00:00

“put an end to or protect persons, not of its (their) nationality who are subjected to serious violations of fundamental human rights, in particular the right to life, without the consent of the target State and without any form of authorization by the UN Security Council.”

As tension between Russia and Ukraine escalates, the world watches closely and several decisive steps have been taken by some nations to quell the situation. We analyse the origin of the crisis and provide some context regarding what it could possibly escalate to if we don't learn from history.

More than a week into Putin’s “Special Military Operations” in Ukraine, preliminary attempts at acquiring a ceasefire have failed and the 64km long Russian military convoy, warts-and-all, continues its march on Kyiv.

The invasion was the outcome of a yearlong crisis that began after Russia started massing troops in excess of 170,000 and military equipment along Ukraine’s eastern, southern and northern borders. This paper will draw from historical sources to provide an account of the actions that have occasioned these state-of-affairs.

Rus: Then and Now

In July last year, Putin, somewhat strangely, published an article. On the historical unity of Russia and Ukraine, as the article was prosaically titled, stressed the premise that the Russian and Ukrainian people are essentially one people emanating from the “same historical and spiritual space”. Recounting that the two peoples both trace their respective origins to the great 9^th Century Slavic Empire of Ancient Rus, the President chronicles the subjugation of Ukraine by various foreign powers before their fated reunification with the Kingdom of Russia in the 18^th Century and their subsequent incorporation into the Soviet Union following the Russian Revolution between 1917-1923.

At first glance, this heavily romanticised account of historical relations between the two countries reads like an ode to Russo-Ukrainian unity hence the call for “the closest integration” between the countries. Yet, a closer look will expose the article as an attempt to undermine the sovereignty of Ukraine. References to the West as “those forces that have always sought to undermine our unity” essentially strip Ukraine of its autonomy and reduces the second largest European country into a client state to be used to further the interests of a certain principal power: and he is determined that Russia should be that power. He says as much in the article declaring, “I am confident that true sovereignty of Ukraine is possible only in partnership with Russia.”

Spheres of Influence

Classicists and neo-realists alike swear by a supposed need for powerful states to take all necessary measures to prevent other powerful states from consolidating enough military power as a means to ensure their own survival. The so-called balance of power theory gained prominence during the Cold War and informed the security decisions that countries on either side took in that era of bipolarity.

In that context, spheres of influence began to develop around major powers in countries in which these powers exerted some economic, political or military influence. The process of Finlandisation, a term coined from Finland’s general policy of restraint to the foreign policy of the Soviet Union, was used to ensure neighbouring less powerful states were compliant to the foreign policy dictates of their more powerful neighbours.

Vladimir Putin has spoken with nostalgia about Russia’s historic greatness and has bemoaned the dissolution of the Soviet Union describing same as “the greatest geopolitical catastrophe of the [20th] century."

This essentially drew neighbours of power into its sphere of influence and ensured that other powerful nations could not compromise their interests from their neighbours. In some ways, the United States’ behaviour during the Cuban Missile Crisis, which resulted in the establishment of a direct Washington-Moscow line, can be interpreted as the US asserting its supposed sphere of influence despite Cuba being a sovereign nation and in fact being ideologically opposed to the US.

Nonetheless, one would question the relevance of such condescending perspectives of the global order, especially in a post-War context where the international order is bound by a miscellany of laws and norms implemented by various international organisations and institutions which stress the sovereignty of all states, rich or poor, small or large. Unless that person is Putin, and for them, the Cold War is not necessarily over.

Every Step You Take

Ever since assuming office in 2000, Vladimir Putin has spoken with nostalgia about Russia’s historic greatness and has bemoaned the dissolution of the Soviet Union describing same as “the greatest geopolitical catastrophe of the [20th] century… Tens of millions of our fellow citizens and countrymen found themselves beyond the fringes of Russian territory.” Constant reiteration along these lines suggests that Mr. Putin continues to regard former Soviet states as remaining, in some way or form, connected to modern Russia and definitely still within its sphere of influence.

To this extent, the Kremlin has remained influential in the politics, economy and culture of its neighbours. In the Ukrainian case, this involved extensive lobbying to prevent Ukraine from forging closer ties with the European Union. Notwithstanding strong support in the Rada, Ukraine’s parliament, for the adoption of an Association Agreement which would have fostered enhanced political and economic ties between Ukraine and the EU and its subsidiary bodies, the then Ukrainian executive rejected the agreement following alleged pressure from Moscow. This turned out to be a grave miscalculation on Moscow’s part as the refusal spurred massive public opposition which spiralled into larger protests on perceived widespread corruption, human rights violations and the overreach of oligarchs in Ukraine.

The resultant 2014 Euromaidan Revolution brought an end to the tenure of Viktor Yanukovych who fled to Russia after the Rada removed him from office. Russia’s response to the revolution, annexing Crimea and activating separatist voices in the Donbas region, was not only punitive but additionally showed the resolve of Moscow to destabilise its neighbours if they were not compliant or neutral in the least.

The treatment of Belarus in recent times further shows the dynamicity of Moscow’s approach to its former compatriots. Aleksandr Lukashenko of Belarus is one such man who has endured the full breadth of the Kremlin’s mood swings. Once known for his deft manoeuvring between East and West, notably holding out on formally recognising Crimea’s supposed accession to Russia, attempts to hold onto power in his country have forced him to fully depend on the Kremlin to stifle dissent and purge protests which arose from the 2020 presidential election which was marred by accusations of fraud.

Crippling sanctions from the United States and its allies have forced Lukashenko’s government to inch further into Moscow’s fold. Russia, on its part, has revived the so-called Union State, a 1997 agreement for the economic and defence integration of Belarus and Russia which had been thought to be redundant. It is the enforcement of this Union State that has allowed Russian troops to attack Ukraine from its shared border with Belarus.

Yet, to consider the ongoing conflict from the solitary lens of Russian aggression is to ignore decades of context which, while not justifying them, provides a counter-narrative to the prevailing one that the Kremlin’s actions are extraordinary in the context of international relations.

NATO: Wider Still and Wider

The 1945 Potsdam Agreement divided Germany into four administrative districts under the control of each of the allied powers (France, Soviet Union, United Kingdom, and the United States) with the Soviet Union controlling much of Eastern Germany. Despite being completely within the area under Soviet administration, Berlin was also divided into four regions with the Soviet Union controlling East Berlin to mirror the broader German division.

When disputes arose amongst the Western powers and the Soviet Union due to the introduction of the Deutschmark in Western Germany, the Soviets blocked the Western powers’ railway, road and canal access to the areas of Berlin under their control. The Berlin Blockade marked, in essence, the beginning of the Cold War.

Following the Blockade, several arrangements were developed by the Western powers to contain Soviet influence and check the spread of communism. The North Atlantic Treaty was the progeny of these arrangements. The Treaty was signed in April 1949 with 12 signatories namely the United Kingdom, France, Belgium, Netherlands, Luxemburg, United States, Canada, Italy, Iceland, Portugal, Norway and Denmark with the express intention “to keep the Russians out, the Americans in and the Germans down”. And so the North Atlantic Treaty Organisation (NATO) was formed as a military alliance. Article 5 of the founding treaty establishes the principle of collective defence so that an attack against any NATO country is considered as an attack against all of them.

It stands to reason therefore that with the fall of the Berlin Wall in 1989 and the subsequent dissolution of the Soviet Union in 1991, the objective of NATO had been realised. It may therefore have been prudent for the military alliance to be dissolved as an ensign of a new era in international politics where notions of polarity had been excused in favour of collective adherence to International Law and to the Institutions and Organisations that enforced them. Instead, the United States, which had by then become the principal NATO state, leveraged on the unipolarity of the International Order to fashion itself to some as the world’s policeman and to others, the world’s bully.

NATO unilaterally conducted a 4-month aerial bombardment of the Federal Republic of Yugoslavia during the Kosovo War without authorisation of UNSC on grounds that this bombardment constituted a humanitarian intervention.

Post-Cold War, the then Alliance for collective defence has morphed greatly into a political alliance. Under the banner of exporting democratic values, NATO has courted at worst and encouraged at best, the accession of former Warsaw Pact countries to NATO. The enlargement critically included the Baltic states of Latvia, Lithuania and Estonia who all share land borders with Russia. This expansion was done possibly-as this is a matter of great contention-against an assurance given, during the Two Plus Four Agreement negotiations by then US Secretary of State Baker to the Soviet Union to expand “not one inch eastwards” and certainly against the advice of several US foreign policy experts including Paul Nitze and Robert McNamara.

In fairness to NATO, no binding instrument or formal arrangement precluded their Eastwards expansion upon German reunification. All countries who did join the Alliance primarily did so of their own accord as they were well within their rights to do so as sovereign countries. In fact, the NATO-Russia Founding Act, which was meant to guide relations between NATO and Russia as partners for peace and security in the Euro-Atlantic area, expressly recognised the sovereignty of all states and their “inherent right to choose the means to ensure their own security”.

Nonetheless, it is of little doubt, as Boris Yeltsin wrote to Bill Clinton, that Eastward NATO expansion was not favourable to Russia-NATO relations and not necessary within the security context of Eastern Europe in the 90s. Additionally, George Kennan, the legendary US diplomat credited with inspiring the Truman Doctrine which has guided US foreign policy since World War II, stated unequivocally that “expanding NATO would be the most fateful error of American policy in the entire post-Cold War era.”

That NATO went ahead to expand severalfold despite the concerns of the Russian Federation was in bad faith in the least.

An action which has happened to be no less consequential in the current conflict given that amongst others, an assurance not to expand NATO Eastwards, the removal of NATO troops from Eastern Europe and a commitment not to deploy additional nuclear weapons outside the United States and remove all nuclear weapons previously deployed formed part of the security guarantees that Russia sought from the United States in the lead up to the invasion.

The Moral Compass of the World Points North

One must, when considering matters of international relations, lend themselves to the immutable fact that that sphere is devoid of any government properly so-called and that the attendant repressive and implementative apparatuses which are ordinarily associated with governments are not necessarily existent. It follows that the international order, to the extent that any such order exists, is subject to the power and willingness of individual state parties to set for themselves rules that regulate their activities in this sphere and abide by same whether or not it favours them at any given point.

Following the end of the Second World War, consensus gathered in the global metropoles on the need to ensure the bloodshed witnessed in the war was never repeated. The United Nations was thus established in 1945 with the coming into force of the UN Charter. As the constitutive treaty of the UN, the Charter establishes and empowers certain organs to maintain or restore international peace and security. Principally, Chapter VI of the Charter provides for the Security Council (UNSC) to undertake military measures to restore international peace and security as a last resort.

While Article 2(4) of the Charter precludes states from the threat or use of force against the territory of any other state, the Security Council may employ military measures to stop a conflict if the required nine members vote in favour of employing such measures and none of the permanent five members exercises their right to veto. Nonetheless, NATO unilaterally conducted a 4-month aerial bombardment of the Federal Republic of Yugoslavia during the Kosovo War without authorisation of UNSC on grounds that this bombardment constituted a humanitarian intervention.

Recalling that the international order is framed by consensus, NATO’s bombardment of Yugoslavia and the routine military invasion of the United States in other countries, notably in Iraq, Afghanistan and Syria, set a precedent that states may intervene militarily in the territories of other states to;

It is this precedent that the Russian Federation has used as a pretext to intervene in Ukraine purportedly to stop a genocide against people in the Donbas Region.

The Grass that suffers

It is within this context that the resurgence of such Cold War-era rhetoric and operations are partly attributable to a failure to show leadership upon the USA’s attainment of unipolarity of the global order. In an era defined by the United States’ consistently undermining International Law, commentators cannot feign shock that another country, great in its own right, is pursuing its military objectives outside the scope of the UN Charter. International Law must be good enough for all of us lest, as has become evident in the case of Ukraine, less powerful states will bear the brunt of the grandstanding of major powers.

Author

Sam Kwadwo Owusu-Ansah | Lead Analyst, Foreign Policy | s.o@borg.re

Subsidy removal or retention will mean tough decisions.

2022-03-04T00:06:19+00:00

Issue-Brief

Nigeria is faced with a catch 22 - to increase, reduce or abolish fuel subsidy. Whichever bait wins the country will face repercussions of decades of subsidy. This issue-brief looks at what subsidy removal or retention could mean for Nigeria.

The word subsidy is not abstract or unheard of in many economies, especially within developing nations. A sizable number of producers across sectors from farming, healthcare, and energy products received subsidies or some form of government financial support like guaranteed minimum pricing.

Energy subsidies are widely adopted, and, for some nations, they act to ameliorate the socioeconomic shock from oil prices. And while others' subsidies through conscientious policymaking have been successful in between public welfare and economic fiasco.

In 2020, globally positioned as the 10th country with proven crude oil reserves - Nigeria accounted for 3.8% of the exported crude according to OPEC. That percentage was worth $25.2bn and then, in the same year, Nigeria spent $43.46bn on the importation of petroleum products. Nigeria imports close to 90% of its locally consumed petroleum products and worse still these prices are reflective of international crude prices (taking into consideration foreign exchange, devaluation, and inflation).

The nations’ boost for refineries (to refine the crude reserves the nation possesses to refined petroleum products) utilizes less than 30% of its installed capacity. Billionaire Dangote is taking up the challenge to build an $18bn refinery in the Lekki Free Zone near Lagos employing over 57,000 people and expects the world's biggest single-train facility as it progresses.

This effort alone will not completely meet the expected daily consumption demand, so the wheel restarts - Nigeria will import petroleum products in the years to come unless more refineries come up.

"... Subsidy is not free money either - for the billions spent on servicing subsidies, other segments of the economy are severely malnourished with underdevelopment. Something has got to give for the cost of imported fuel."

When fuel subsidies were first introduced in the 1970s - the sole purpose was to leverage the economics of subsidy towards cushioning the hardship faced by Nigerians. This price manipulation whereby the pump price of fuel for sale is fixed and the government provides the retailer with the difference between the actual market price (import, storage, and transportation) and the Expected Open Market Price (EOMP). Subsidies are not cheap.

The price tag of fuel subsidy comes with an approximate cost of ₦250bn a month (for context, in 2020 capital spending allocation was ₦46bn and in the first 9 months of 2021, ₦864bn was spent on fuel subsidy). Subsidy is not free money either - for the billions spent on servicing subsidies, other segments of the economy are severely malnourished with underdevelopment. Something has got to give for the cost of imported fuel.

At what seemed like an expensive political risk, President Goodluck Jonathan's administration canvassed and lobbied for the removal of the subsidy, with Nigeria set to finally remove the subsidy in January 2012. This came with backlash and council strikes and the subsidy reversed. Since then, the price of fuel has been adjusted to inflation rates over the decade, with sublime movements for fuel subsidies across the nation.

In 2022, a year before a presidential election; Nigerians seem threatened with removal of the subsidy soon or with the next administration.

Decisions towards subsidies used to ‘cushion’ economic shocks could be very sensitive to address but one that economists, as well as international organizations like World Bank, advise “aggressive reform effort” needed to end fuel subsidy.


If fuel subsidy is not removed…	If fuel subsidy is removed…
The rising interest rate and the currency devaluation will eventually mean the country pay more for imported refined crude	The government is proposing a 'subsidy with subsidy' approach where the poorest people will be provided with a transport allowance of ₦5,000
Capital spending allocated to other developments healthcare, education e.t.c is infringed.	Price hike pressure national investment in intra-state transport infrastructure which reduces emission, noise/air pollution and congestion
Increase in corruption from buffering up the daily consumption through subsidy scams	Clarity towards indicating how much fuel Nigeria consumes, promoting transparency and oil nationalism

Whichever decision is taken, by 2023, Nigerians would face a more difficult time, with The International Monetary Fund estimates that over 90% of the nation’s 2022 revenue will be spent on debt servicing. Subsidy removal or retention will bring tough decisions that would have to be made in the interest of the country.

Issue brief by; Oghosa Erhahon | contact

Our issue-briefs provides a platform for commentaries on knowledge surrounding a current relevant local or transnational discussion.

Submit your research to our Development Research Repository

2022-02-09T22:27:50+00:00

Research Repo.

Join us in building a knowledge-based society and mobilising ideas for development.

We are looking for fresh ideas from our community.

The borg team is looking for insightful and development-driven research papers to cover in our research repository section. This is in line with our core goals of building a knowledge-based society and mobilising ideas from multiple stakeholders to improve decision-making.

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\u00a92024 borg. Legal & Policy Research

Cryptocurrencies and The Emergence of NFTs: A New Dawn for Creatives

2021-12-05T13:21:12+00:00

Tech and Innovation .x

The payments system is evolving rapidly especially with the increased use of blockchain technology. The emergence of Non-Fungible Tokens is further revolutionising the marketplace for creatives around the world. This thinking looks at the attitude of Nigerian regulators to cryptocurrencies, what NFTs are and how they could be beneficial to creatives in the long run.

The world of finance has gone through a lot of changes, most of which, have benefited people and their businesses. Newer methods of making payments have replaced the conventional ways of carrying out transactions; ‘cryptocurrencies’, ‘blockchains’, ‘tokens’, and the likes are now on everyone’s lips and very rampant especially amongst the younger and more tech-savvy demographic.

In 2009, the first decentralised system of peer-to-peer payment (Bitcoin) was introduced and other novel modes of payment were created subsequently which are known generally as cryptocurrencies. These innovations have received mixed reactions; mostly positive from the general public and, prevalently, disapproval from the government. As a result of this, for example in Nigeria, the CBN has put out a series of circulars mitigating the world of cryptocurrencies and the risks that might be associated with it.

Financial regulators in other countries such as Canada, Japan and the U.K. have recently cracked down on the crypto industry by banning one of the largest cryptocurrency exchanges (Binance). In U.S.A Binance is also being investigated over concerns that the platform is used to carry out illegal transactions and evasion of tax.

All these do not write off the usefulness of the new era in the financial world to a host of people. It has been a huge source of income to people, a means of meaningful investments for Nigeria especially in a time where very own legal tender has been experiencing drastic fluctuations. Nigerians see the need to cast their hopes on the value of the United State Dollars than wallow in the uncertainty of Naira. At the end of the day, it might somewhat, be a battle of opinions as to the usefulness of digital currencies in various jurisdictions.

it is important to note that the regulation, as claimed by the Commission, is not aimed at antagonising technology but establishing rules which will promote ethical behaviours in the industry.

What the law says about Cryptocurrencies in Nigeria

In Nigeria, cryptocurrencies are not labelled illegal; rather, what the digital currencies are used for is the utmost concern of the government. It is as a result of the unregulated nature of cryptocurrencies that banks and financial institutions were prohibited from dealing in digital currencies and also ordered by the Central Bank of Nigeria (CBN) to deactivate accounts of individuals dealing in cryptocurrency in February 2021.

The CBN has frowned at cryptocurrencies strictly because they are products of unregulated companies and using them in Nigeria would go against the existing laws given that the currency is not the official legal tender of Nigeria. Also, the apex financial body has settled with the fact that the presence of anonymity and the absence of “Know-Your-Customer” (KYC) has made cryptocurrency a red flag.

It has made digital currencies susceptible to criminal uses such as terrorism funding, money laundering, drug trafficking, tax evasion and a host of cyber-criminal activities. As a result of cyber-crimes emanating from cryptocurrency-related activities, and the issues of untraceable data of subscribers/users of digital currencies, the Nigerian Cyber Crime (Prohibition, Prevention) Act 2015 as well as the consumer protection framework of the CBN has given the responsibility to all financial and fintech companies to verify and keep safe the private data of their customers.

The Securities and Exchange Commission offered to regulate activities in the crypto world by coming up with strategies and regulations that will guide digital currencies. It also proposed to interact with genuine cryptocurrency innovators seeking legitimacy and relevance. Subsequently, the commission went ahead to release regulatory guidelines for fintech companies and start-ups as well as for cryptocurrencies.

The position of the commission is that cryptocurrencies are securities unless proven otherwise. Therefore, according to SEC, all Digital Assets Token Offering (DATOs), Initial Coin Offerings (ICOs), Security Token ICOs and other Blockchain-based offers of digital assets within Nigeria or by Nigerian issuers, sponsors or even foreign issuers targeting Nigerian investors shall be subject to the regulation of the Commission. Digital assets existing prior to the implementation of the regulatory guidelines will have three (3) months to submit the requirements (initial assessment filing of documents for registration proper, as the case may be.

However, it is important to note that the regulation, as claimed by the Commission, is not aimed at antagonising technology but establishing rules which will promote ethical behaviours in the industry. The government seems to have supported this argument by launching the anticipated eNaira through the CBN on the 25th of October, 2021. It adopts blockchain technology and is ‘supposed to be a legal and approved virtual currency that has the same value as the fiat Naira.

Even though Nigeria does not have a legal framework for cryptocurrencies or exchanges, there is a push to create one soon which is evident in the activities by the CBN and SEC highlighted above. Lawmakers have therefore been urged to establish a legal framework for digital currencies in Nigeria. Financial agencies have also been charged to likewise build a strong financial system and regulations that will encourage new innovations to thrive.

The Rise of Non-Fungible Tokens (NFTs)

The use of NFTs is highly dependent on blockchains. Blockchains act as decentralised networks that transparently divulge the history of transactions and make it impossible for recorded digital assets to be pirated, modified or deleted. They are permanent ledgers that are used in recording transactions in blocks of computer codes that are linked together.

The difference between NFTs and other tokens such as Bitcoin and the likes is that NFTs possesses distinct identification codes and metadata that makes them different from one another (non-fungible). Other tokens are identical and are available for exchange which is what we see with tokens/coins like Bitcoin, Litecoin, Etherum, etc. For instance, cryptocurrencies like Bitcoin and the likes can be exchanged for another Bitcoin token in a transaction without losing its value but non-fungible tokens are distinct. It embodies a software code which is known as smart contracts.

These smart contracts are open-sourced blockchain protocols that control the transfer of digital currencies between parties under a series of terms and conditions. After this smart code is written it is permanently minted into a token on blockchain such as Etherum and then it becomes a digital certificate of ownership. Although NFTs based works are quite expensive to purchase, it is important to admire the potentials it possesses. It cuts across contemporary lucrative industries which include creative art, gaming and even real estate.

How important is NFTs to creatives
Creators, before the popularity of NFTs, had challenges of how they could make money effectively off their digital creative works. This was owing to the fact these works could be duplicated severally throughout the internet without reduction in quality. The coming of NFTs has made it easy for the creation of a distinct and finite tokenised version of their works and has also helped in commodifying them.

Utilising NFTs has helped in preventing work from being counterfeited. For instance, NFT creators can determine the price of their works and the maximum number of duplicates of the works they desire to be in circulation online. They can mint only one edition of the work or a number of editions and artwork can be minted in various forms but each still remains unique (animations, still images, etc.) Therefore, it is safe to say that an NFT creator can regulate the availability, value and scarcity of his digital craft on the internet. This way the uniqueness of the work is preserved and he exercises proper control over his craft as the owner. The issue of Piracy is also absent in relation to NFT creations as a result of its irreplicable nature.

Lastly, non-fungible tokens encourage the transfer of digital creative assets without the need for an intermediary and are not restricted to the usual practice of the use of third-party platforms to distribute creative content.

Some Nigerian creatives especially artists, painters, graphic designers have explored the NFT innovation. A good example is the recent ‘1111’ project spearheaded by Oladapo Ogunjobi, Olumide Ameen, Fatola Israel which are available for sale in NFTs.

Also, a Nigerian artist, Jacon Osinachi, since 2017 has sold a good amount of crypto art in his career as an artist. Other Nigerian artistes such as Oyindamola Oyekemi Oyewumi and Anthony Azekwoh have long benefited from the NFT space. This is a cue to business inclined creatives, both budding and established, to take good cognisance of this emerging innovation and use it to their advantage.

The music industry is not excluded from the fun. Artists/Musicians can decide to make money off their music without having record labels sign them or pay radio stations to play their songs. A good example is M.I Abaga and Falz who were listed as one of the top 100 creatives for the Binance NFT marketplace.

NFTs and Intellectual Property Rights
The fact that an NFT is created to represent an underlying work of art or any other creation does not mean that the creator or later owner of the NFT will own the intellectual property rights (IPR) e.g., copyright. It governs the ownership of the token and not the underlying IPRs of the author. The intellectual property rights subsist only in the original owner of the work and can only be assigned or licensed as the practice usually is. Therefore, an NFT owner must be aware that he or she would need to expressly acquire either an assignment or licence of the underlying rights from the original author of the work or subsequent owners of the rights as the case may be.

The author may choose to grant the licence but at the same time place some other constraints as regards its use in NFTs. This is necessary in order for the original work to be reproduced. Lack of guidance in this area may lead to infringement liability on the new NFT owner or NFT owners who are the authors of the original work.

The original creator is the copyright owner who retains the exclusive right to modify, distribute and publicly display the art unless he transfers the right to someone else. The purchaser of the NFT on the other hand only receives the token and the right to utilise the copyrighted art. He does not by virtue of acquiring the NFT own the IPRs in the underlying work. For example, if there’s an NFT for a video of a famous football moment of Kanu Nwankwo released as part of a series of limited-edition digital collector’s cards of Super Eagles highlight clips that can be bought and sold on a platform (Super Online Store), the Nigerian Football Federation (NFF) retains copyright in the original video no matter how many times it is bought, who buys it or how expensive it is.

Alterations cannot be made by the purchaser except prior consent has been sought from the NFF. Recently, King of Leon a rock band released their album as an NFT and specifically stated that the buyer only has the licence to display it for personal use and not for commercial purposes in music or films. Decentraland which is a platform for virtual real estate, has it stated in its terms that Decentraland Foundation owns all the IPRs on the website and the such could not be used for commercial purposes by any NFT purchaser. Breach of these licence terms provided on the sales platform would amount to infringement and potential litigation.

Conclusion
The application of NFT technology to buying and selling is just an area that has been predominantly explored. The hope is that in Nigeria, NFT technology would eventually be utilised in carrying out certain basic and usually physical activities so as to make life easy for people. Already in some jurisdictions, NFT tech is being used to create crypto tickets, stamps and the likes.

This alteration is beginning to change the mindset of creatives and the opportunities could be endless. Usually, before one could make a good profit from his or her work or craft generally, for an artist they would have to have done an exhibition or belong to a big record label, for a musician. With the advent of NFTs, one can advertise their works with little or no money and at the same time target the right audience. However, NFT collectors or purchasers should seek proper guidance as regards the purchase and use of NFTs to escape avoidable actions in court as counterfeiting is a major issue plaguing NFTs.

Author

Makuachukwu Okafor | contact: here

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92021 borg. Legal & Policy Research

Tax Deductibility of Donations under the Nigerian Revenue system

2021-11-26T17:37:23+00:00

Fiscal Policy

Charitable donations contribute to development, that is why countries around the world work towards creating a tax system that recognises and encourages donations. This article provides an insight into what the Nigerian revenue system says about tax-deductible donations and how it can be improved.

Donations and financing community projects are some of the common charitable ways of contributing to the development of society. Many corporations and well-meaning individuals often incorporate these in their corporate social responsibility strategy. Hence, it is common for corporations and individuals to occasionally give out cash and material contributions to NGOs, ecclesiastical bodies, public funds, and educational institutions.

Recognizing the importance of donations, there is a global consensus to make them tax-deductible expenses. As a result, corporations can leverage the cost of their charitable activities to reduce their tax liability. In a way, this serves as a motivation for donors to keep up the good work. Nigeria is not exempted. The current tax landscape recognizes donations as tax-deductible. This article provides an insight into tax deductions and the legal framework for tax-deductible donations in Nigeria.

How does Tax Deductions Work?
Think of it as a reduction of a taxpayer’s liability. It is a deduction in the amount a taxpayer is to remit as tax. Generally, individuals and companies have a duty to file their tax returns for the year and pay their taxes to government authorities. For a company, the amount of tax to be remitted is dependent on its size. While large companies (companies that have an annual gross turnover of 100 million and above) are expected to pay 30% of their income, medium-sized companies (those with a turnover between 25 to 100 million) are required to pay just 20%.

A company can reduce the amount of tax to be paid by deducting the cost spent on carrying out charitable and other business projects. For instance, tax laws permit organizations to first subtract the cost of donations from their end-of-the-year profits before calculating how much it is to remit in taxes. This is simply what is known as a tax deduction. In essence, a tax deduction is a means by which a taxpayer lowers his liability by reducing his taxable income.

As an illustration, if company ABC made a profit of 150 million in 2020. But, in the same year, it made charitable donations in cash to a COVID-19 fund totalling an amount of 10 million. In determining how much is to be remitted in tax, the company will first deduct the 10 million from the general profit of 150 million before deriving the 30% of its income that it owes in tax. By implication, the company lowers the amount in which it ought to remit. Thus, the company pays 30% of 140 million as tax instead of paying 30% of 150 million.

Given the current tax landscape in Nigeria, tax-deductibility of donations is restricted to corporate entities alone and does not apply to the personal income of individuals. Consequently, an individual cannot reduce his tax liability by deducting the money expended on donations from his income. Note that our focus is exclusively on the tax-deductible status of donations and not on other allowable deductions such as business expenses incidental to the production of profits, i.e., salaries of employees, rents, cost of acquiring property and capital, etc.

... whenever a company makes a charitable donation to a fund set up by the government for the purpose of a pandemic or natural disaster, the cost of such donations is now recognized as being tax-deductible – that is, can be used to reduce the company's taxable income.

What Laws Govern Tax Deductions?

Two primary legislations contribute to the legal framework of tax deductibility regarding donations in Nigeria. They are the Companies Income Tax Act (CITA) and the Finance Act, 2020.

Companies Income Tax Act
Part 3 of the CITA (as amended) covers tax deductions. Section 24 accounts for general deductions that may be made before determining the portion of a company's income subject to tax. Here, allowable deductions include expenses such as;

Interest payable on loans acquired as capital for the company
Liability incurred in respect of property acquired for business purposes
Salaries or wages of employees and company executives
Pension contributions
Other managerial and maintenance expenses, etc.

Moreover, Section 25 specifically establishes the tax deductibility status of donations. It provides that donations which companies make to specific funds, bodies, or institutions in Nigeria, or for any charitable purpose, in general, are deemed tax-deductible subject to certain listed conditions to wit;

The donation must have been made out of the company's profits; it should not be expenditure of a capital nature.
The allowable tax deduction cannot exceed 10% of the company's assessable profits for the year the donation was made.
The fund, body, or institution to which the donation is made to must be registered and incorporated in Nigeria. Furthermore, it must be specified in the 5th schedule of the Act.
Donations made by the company must not be any form of payment for a value.
Finally, where a donation is revenue or capital in nature, it may be deductible if it is made to a tertiary institution.

However, the deduction must not exceed an amount equal to 15% of the company’s total profits or 25% of the tax payable for the year the donation was made (whichever is higher).

Importantly, for a company's donation to be tax-deductible, it must be made specifically to either of the following entities: a public fund, statutory body or institution, ecclesiastical, charitable, educational, or scientific institutions – all of which must be registered in Nigeria and included in the 5th schedule of the Act. Currently, 42 entities are already recognized for this purpose. More so, the Act empowers the minister of finance to make amendments to this schedule by an Order in the Federal Gazette.

Earlier this year in March, the Federal Inland Revenue Service (FIRS) issued a circular detailing the procedure in which funds, bodies, and institutions may be listed under the 5th schedule of CITA for the purpose of being recipients of tax-deductible donations. Entities not included in the 5th schedule that desire to receive tax-deductible donations must follow the procedure highlighted in this circular to get listed.

Finance Act, 2020
This Act expanded the scope of tax deductions of donations by amending Section 25 of the CITA. In doing so, it cleared the uncertainties surrounding the tax-deductible status of donations made in respect of the COVID-19 pandemic. By virtue of the Act, donations made in cash or kind to any fund set up by the government or its agencies in respect of any pandemic or natural disaster are deemed tax-deductible expenses. The deduction remains subject to 10% of the company's assessable profits after other allowable donations have been deducted.

The import of the foregoing is that whenever a company makes a charitable donation to a fund set up by the government for the purpose of a pandemic or natural disaster (such as COVID-19), the cost of such donations is now recognized as being tax-deductible – that is, can be used to reduce the company's taxable income.

Why are donations tax-deductible? What is the rationale?

The answer is not far-fetched. It is as simple as this – government authorities recognize the positive impact that charitable activities and community service programs have on individuals, institutions, and the society at large. It thus seeks to promote and encourage this practice amongst corporate entities. Therefore, companies are encouraged to give donations, having in mind that at the end of the financial year, the expenses incurred can be used to lower their tax liability. This serves as an advantage to companies as they can strategically plan their activities in order to reduce their annual tax liability to the revenue authorities.

The events of the COVID-19 pandemic further demonstrate the social utility of this status. One cannot overlook the impact of the donations made by companies in the private sector to government funds and institutions in support of the fight against COVID-19. As of April 2020, the cash donations made by companies already peaked at about 21 billion naira, excluding other donations in kind. It is arguable that without donations being tax-deductible, companies may not have been easily spurred to make such significant contributions.

Although the tax-deductible privilege seems very commendable, it certainly has its drawback. Companies in Nigeria and in the world at large are empowered to take advantage of tax deductibles to constantly limit their tax liabilities, thereby reducing the country’s tax base. What this ultimately translates to is a reduction in the tax revenue accruing to the government.

Extending the scope
Given the utility of tax-deductible donations, it is recommended that the government consider extending this practice to the personal income of individuals. This will invariably encourage the practice of making donations amongst individuals that would in turn benefit society. For instance, in the United Kingdom (UK) and South Africa, the extant tax framework permits individuals to subtract the cost of donations as tax-deductible expenses before determining their tax liability.

These two countries are worthy of emulation by virtue of their relatively strong tax-to-GDP ratios, which represents the significant value that taxes contribute to their economy. In 2018, South Africa ranked 4th in Africa for tax-to-GDP ratio with a percentage of 27.8. Whereas, that of the UK increased from 32.9% in 2018 to 33.0% in 2019.

An expected counter-opinion to this recommendation may centre around Nigeria’s recent efforts to focus more on taxation for generating needed revenue, especially in light of the aftereffect of the COVID-19 pandemic and the attendant drop in oil prices. While this recommendation may easily appear to be counter-productive to the government’s effort, it is still tenable to some extent. If donations are tax-deductible on personal income, individuals will do more charitable giving, thus contributing to the improvement of the welfare of the society — the same goal that the government aims to achieve with collecting taxes in the first place. So, it’s a win-win.

A second recommendation is that the government should also devise a means to ensure that the tax-deductible arrangement in respect of donations is not unduly exploited by both individuals and companies. With a good strategy in place, there can be a check to the excesses that the tax-deductible system may present, ultimately ensuring that the government is not losing out in the long run.

Author

Olayinka Shado | Research Analyst, Fiscal Policy | o.s@borg.re

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92021 borg. Legal & Policy Research

Overview of the Venture Capital (Incentives) Act

2021-10-11T15:01:31+00:00

Fiscal Policy

The Venture Capital (Incentives) Act was established in 1993 to provide tax relief and other incentives to venture capital companies (investors) and venture project companies (startups). The Act contains several incentives such as capital allowance and reduction of withholding tax to investors and startups which take part in one or more of the objectives under the Act. We looked at how the Act will spur the inflow of venture capital investments into the economy.

The number of venture capital (VC) deals in Africa has been on an upward trend since 2014, with Nigeria accounting for 14% of all the total VC funding deals in Africa between 2014 and 2019. As more founders set up tents in Nigeria, the economy is set to benefit from the inflow of revenue, the creation of innovative products and services, and the development of human capital.

However, it goes without saying that the success of these startups will largely be determined by support from the government in those countries where they are located. Innovative policies, helpful legislation, tax benefits and other incentives create a fertile ground for startups to grow.

In Nigeria, several laws exist to support startups. Some of these include the exemption of small businesses with an annual turnover of less than N25m from companies’ income tax; a pioneer status tax (tax-free) incentive to startups that have been set up under specific industries or to provide certain products (to be enjoyed in their first year of operations); and the setup of a growth board on the Nigerian Stock Exchange in order to encourage companies with high growth potential to seize the opportunity of raising long term capital and promoting liquidity.

One of the earliest legislation in support of startups is the Venture Capital (Incentives) Act enacted in 1993. It was set up for the grant of tax relief and other incentives to venture capital companies and venture capital projects. The Act was enacted at a time when the Government embarked on the privatization of several government-owned institutions. It also came at a time when there was the expansion of various sectors such as the manufacturing and the finance sectors. It was therefore necessary to provide legislation that would encourage investors to put in their money for the growth and development of those industries.

Structure of the Act
The Act addresses both venture capital companies (the investor) and venture project companies (the startup). In order for either the venture capital company or venture project company to enjoy the incentives under the Act, the Federal Inland Revenue Service (“FIRS”) shall first certify that they have carried out or are capable of carrying out one or more of the objectives set out under the Act.

The objectives are listed in section 2 of the Act. They are: (a) the acceleration of industrialization by nurturing innovative ideas, projects and techniques to fruition; or (b) the commercialization of research findings with high potential for far-reaching forward or backward linkages; or (c) the promotion of self-reliance through the establishment of resource-based and strategic industries through the provision of risk guarantee and insurance; or (d) the encouragement of indigenous processes and technologies; or (e) the promotion of the growth of small and medium scale enterprises with emphasis on local raw materials development and utilization; or (f) such other objectives as may, from time to time, be specified by the FIRS.

These objectives are pointers to the country’s needs at the time, which included industrialisation and the growth of the economy through other industries asides oil and gas; development of human capital and entrepreneurship, especially as the population rapidly increased over and above the few available government jobs; and a focus on local production of goods and services in order to reduce reliance on exportation.

The Act set a threshold in section 3 for the percentage of investment that a venture capital company must contribute to the venture project. In order to enjoy the tax relief and incentives under the Act, a venture capital company must make an investment that is not less than 25 per cent of the total capital required for the venture project. Section 4 mentions the various incentives that shall accrue to venture investments undertaken by a venture capital company in line with the Act.

These incentives are as follows:
(a) Capital allowance: an equity investment by a venture capital company in a venture project company shall, for purposes of capital allowance under the Companies Income Tax Act, be treated as follows- (i) for the first year deduct 30 per cent; (ii) for the second year deduct 30 per cent; (iii) for the third year deduct 20 per cent; (iv) for the fifth year deduct 10 per cent;

(b) Exemption from capital gains tax: the amount of capital gains accruing to a venture capital company from a disposal of its equity interest in a venture project company shall be exempted from capital gains tax as follows- (i) for the disposal of capital within five years of investment, 100 per cent; (ii) for the disposal of capital between six and ten years of investment, 75 per cent; (iii) for the disposal of capital between eleven and fifteen years of investment, 25 per cent; (iv) for the disposal of capital after fifteen years, 0 per cent;

(c) Reduction of withholding tax: the withholding tax payable on dividends declared by the Federal Inland Revenue Service in a venture project company shall be reduced by 50 per cent of the prevailing rate of withholding tax in respect of dividends received by a participant in the Risk Fund and venture project company within the first five years;

(d) Application of the Industrial Development (Income Tax Relief) Act: the provisions of the Industrial Development (Income Tax Relief) Act shall apply to a venture project company. The principal act has since been amended by the Industrial Development (Income Tax Relief) Act (Amendment) 2018. The amendment provides for additional incentives for some categories of investments including a Pioneer certificate which will grant a tax holiday to companies that make investments in designated industries and/or products for an initial period of three years, extendable for one or two additional years;

(e) Application of the Export (Incentives and Miscellaneous Provisions) Act: the provisions of the Export (Incentives and Miscellaneous Provisions) Act shall apply to a venture project company to the extent of the involvement of the venture project company in the exportation of its products.

Section 5 gives the FIRS the power to determine from time to time, for the purposes of the Act, a person as a venture capital company or a venture project company.

Conclusion
Venture capital deals have exponentially increased in Nigeria and across Africa. The provision of attractive incentives and tax benefits have certainly played a huge role in encouraging venture capital firms to invest in startups. Although not a very popular legislation, venture capital firms ought to take full advantage of the Venture Capital (Incentives) Act in order to ease some of the financial strains that come with tax concerns and other pecuniary matters when investing.

Finally, it is noted that the objectives outlined under the Act which are required to be carried out under a venture project are wide enough to include present day objectives such as e-commerce and tech-related businesses. It is however recommended that pursuant to section 2 (f) of the Act, the FIRS specifically spells this out in order to match up with current realities.

Author

Emaediong Lawrence | Research Analyst, Technology and Digital Economy | e.l@borg.re

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92021 borg. Legal & Policy Research

Licensing and Regulating Payment Service Holding Companies in Nigeria

2021-08-26T10:03:05+00:00

Banking

The CBN recently issued Guidelines for Licensing and Regulating Payments Service Holding Companies (PSHC). We discussed key features of the PSHC guideline and highlight the factors to be considered for entities who intend to provide more than any of the following services; mobile money operations, switching & processing and payment solution services.

In line with the CBN’s mandate to promote an efficient and viable payment system, the CBN issued a circular on August 3 2021 to all (DMBs) Deposit Money Banks, (OFIs) Other Financial Institutions and (PSPs) Payment Service Providers on the issuance of the Guidelines for Licensing and Regulating Payments Service Holding Companies (PSHC) in Nigeria.

This guideline stipulates the prerequisites for the operation of a PSHC and its subsidiaries within the payment ecosystem in Nigeria. The CBN’s circular issued in 2020 on New License Categorisations for Nigerian Payments System mandated Fintech companies who were desirous of operating a switching and mobile money business to establish a holding company structure (the structure) however there was no guideline for the implementation of the structure.

The guideline available was the Guidelines for Licensing and Regulation of Financial Holding Companies (GLRFHC) in Nigeria issued on August 29 2014 primarily for banking groups engaged in non-core banking activities. Interestingly, this PSHC Guideline is a replica of the GLRFHC with minute amendments as to the application fee and licensing fee. We would discuss key features of the PSHC guideline and highlight the factors to be considered for entities who intend to provide more than any of the following services; mobile money operations, switching & processing and payment solution services.

What is a Payments Service Holding Company?

A PSHC is a holding company emplaced with the sole aim of making and managing equity investment in two or more companies being its subsidiaries. These subsidiaries are to provide services in either of these categories:

1. Mobile Money Operations
2. Switching and Processing
3. Payment Solution Services

The subsidiaries of a PSHC are prohibited from acquiring shares in the PSHC or shares of other subsidiaries. Except with the prior written approval of the CBN

A PSHC must be non-operating, established solely to hold equity investment in its subsidiaries as well as have a minimum of two subsidiaries providing payment services in either of the categories above inclusive of a mobile money operator and a switching company. Notably, the PSHC retains a dual structure arrangement, where a PSHC intends to switch to a mono-line service the approval of the CBN must be sought. As an intending mono-line payment service provider the request for approval must include an annual audited financial statement for 3years prior to its request for approval and divestment plans from its subsidiaries.

What Requirements do Payments Service Holding Companies satisfy to acquire License?
The licensing process involves two phases namely Approval-in-Principle (AIP) and final license. The promoters of a PSHC are required to submit a formal application for the grant of a license. It is pertinent to note that, a financial holding company with a payment service provider as a subsidiary that has been licensed prior to the issuance of the guidelines, is not required to apply for a PSHC license. The licensing process begins with the AIP.

At this stage, an application is submitted to the CBN, accompanied by an application fee of ₦1,000,000, evidence of prescribed paid-up capital, detailed business plan or feasibility report and the promoters of the PSHC must also submit a written undertaking stating that the PSHC would be adequately capitalized at all times as well as under the supervisory authority of the CBN.

Regulated foreign institutional investors are also required to submit a no-objection letter from the regulatory body in their home countries to the CBN. Upon obtaining this, the promoters may proceed to implement activities permitted at this stage. However, this license should not be misconstrued as an authority to commence operations or perform any of the permissible activities of a PSHC.

Subsequently, an application for the grant of a final license must be submitted not later than six months after obtaining the AIP. The promoters of the proposed PSHC are to submit the application to the CBN accompanied with a non-refundable licensing fee of ₦5,000,000, evidence of investment of a payment service company and payment of capital contribution by each shareholder inclusive of the proposed head office location for the take-off of the PSHC, schedule of changes as well as evidence of achieving technical requirements and organizational structure.

Ownership, Control and Corporate Governance of a Payments Service Holding Company.
A PSHC must have a board size ranging between 5 and 10 members including an individual with requisite experience in the businesses of the subsidiary payments service. The approval of the CBN has to be obtained for ownership of shares from 5 per cent and a change in ownership which results in a change in control of the PSHC.

The subsidiaries of a PSHC are prohibited from acquiring shares in the PSHC or shares of other subsidiaries. Except with the prior written approval of the CBN, no PSHC director, shareholder or agent shall enter into an agreement to change the control of the company or transfer of shareholding of 5 percent and above as well as the sale or transfer of the whole or part of the PSHC, issuance of new shares, merger and takeover.

A PSHC shall cease to be a PSHC and be required to return its license to CBN where:

1. It loses control of either its switching and processing subsidiary company or mobile money operation subsidiary, for a period exceeding six (6) consecutive months

2. It has only two subsidiaries and loses its controlling interest in either of the subsidiaries for a period exceeding 6 consecutive months.

Furthermore, subsequent to the cancellation of its license, a PSHC shall divest wholly and completely from that subsidiary within a period of six months or any other period as may be determined by the CBN, to enable the subsidiary to continue operations as an independent entity.

Scope of Permissible Activities and Non-Permissible Activities
With the prior written approval of the CBN, a PSHC can provide broad policy direction, shared services or enter into a management service contract with any of its subsidiaries in respect of the following areas namely, human resources services, risk management services, internal control services, compliance services, information and communication technology, legal services and facilities such as office space. Shared services may also be provided however the consent of the subsidiary’s board of director's consent is required.

The guideline is restrictive as it fails to encompass Fintech companies engaging in non-Mobile Money Operations and Switch services

Subsequently, a PSHC is prohibited from establishing, divestment and closure subsidiaries without the prior written approval of the CBN as well as receiving income from other sources other than dividend income from subsidiaries, income from shared services, patents, royalties and copyrights, interest earned from idle funds invested in government securities, profit on divestment from subsidiaries and any other source as approved by the CBN.

Minimum Paid-up Capital, Capital Reserves, Payments of Dividends and Acquisition of Subsidiaries
The guidelines mandate PSHC's to have a minimum paid-up capital which shall exceed the sum of its minimum regulatory capital and equity of its subsidiaries. Where it owns less than 100% of its subsidiaries, its minimum paid-up capital shall exceed the summation of its proportionate holding in the subsidiaries. Excess capital in one subsidiary shall not be used to augment a shortfall in another.

A PSHC capital is applied for the benefit of its subsidiaries. A PSHC shall ensure that its subsidiaries comply with the minimum capital requirements for each license category. In addition, a PSHC can acquire its subsidiaries however, the PSHC must satisfy that it has adequate capital resources to execute the acquisition. The consideration for acquisition shall be on a cash basis or as approved by the CBN.

Furthermore, a PSHC shall not pay dividends on its shares except all its operational, preliminary and organizational expenses, losses incurred and other capitalised expenses not represented by tangible assets have been completely written off excluding goodwill, adequate provisions have been made to the satisfaction of the CBN for actual and contingent losses as well as compliance with any capital requirements as stipulated in the guidelines.

Supervision of PSHC
A PSHC and its subsidiaries shall be supervised by the Payments System Management Department (PSMD) of the CBN on a consolidated basis. PSHCs shall render returns to the PSMD and include information pertaining to whistleblowing, internal control, intra-group transactions, risk management, internal control, compliance with corporate governance guidelines and assets and liabilities of the PSHC.

Positives going forward ...

The PSHC guideline is undoubtedly commendable as it acts as a navigating instrument for Fintechs seeking to restructure upon issuance of the new license categories for payments system namely switching and processing, mobile money operations and payments solution services. The PSHC is a noteworthy innovation borne out of the holding company structure introduced by the CBN in 2010 which mandated financial institutions combining banking with non-banking activities to set up a holding company

Consequently, it provides Fintech companies with an opportunity to expand by offering new products and services. Through this Hold Co structure rather than Fintech companies operating as distinct entities while offering various products and services, this affords them an opportunity to operate as separate but connected entities. In addition, the Hold Co structure stimulates efficiency and facilitates the management of risks as it adopts the principle of separation of powers ensuring the holding company doesn’t provide all services, it will as well as stimulate efficiency and facilitate the management of risks.

Furthermore, it facilitates funding for Fintech companies as investors are encouraged to invest by affording investors opportunities to diversify their portfolios with single investments in holding companies. Hence, an investor investing in a PSHC, is indirectly investing in either of the subsidiaries. There is an opportunity in this guideline for entities licensed under payment solutions to be eligible promoters of a PSHC.

Author

Oluwayemisi Adeluoye | Research Analyst, Banking Policy | y.a@borg.re

Ayotunde Abiodun | Research Asisstant, Banking Policy | a.a@borg.re

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92021 borg. Legal & Policy Research

No longer PIB, now the PIA.

2021-08-20T08:49:14+00:00

Revenue

On the 16th of August, 2021 the President signed the Petroleum Industry Bill into law after a wait that spanned for decades, this piece of legislation if fully adhered to promises to be a game-changer within the Nigerian economy. We reviewed some of the provisions in the Act, also highlighting key revenue-generating models deployed.

There is no doubt that Nigeria’s petroleum law is long overdue for reform and the Petroleum Industry Act (PIA) represents a long-overdue overhauling of the petroleum system in Nigeria. The most recent version of the Act was presented to the National Assembly by the President in September 2020 and was signed into law by the President on the 16th of August, 2021.

With the oil and gas industry is highly regulated by the government, the National Petroleum Commission (NNPC) acting as the sole regulator, the PIA represents a complete overhaul of the Nigerian oil and gas sector which seeks to, among others, ensure an increased level of transparency and accountability in the sector by strengthening the governing institutions to attract investment capital through changes to the governance, administrative, the regulatory and fiscal framework of the Nigerian oil and gas industry.

The PIA repeals about 10 laws including the Associated Gas Reinjection Act; Hydrocarbon Oil Refineries Act; Motor Spirit Act; NNPC (Projects) Act; NNPC Act (when NNPC ceases to exist); PPPRA Act; Petroleum Equalisation Fund Act; PPTA; and Deep Offshore and Inland Basin PSC Act. It amends the Pre-Shipment Inspection of Oil Exports Act while the provisions of certain laws are saved until termination or expiration of the relevant oil prospecting licenses and mining leases including the Petroleum Act, PPTA, Oil Pipelines Act, Deep Offshore and Inland Basin PSC Act.

The key changes in the Act include:

Organisational changes
The Act seeks to limit the power of the Minister of Petroleum Resources by revoking the Minister’s power to grant, amend, revoke or renew licenses, and removing the Minister’s seat on the board of NNPC Limited. In addition, two proposed regulators, the Nigerian Upstream Regulatory Commission (the ‘Commission’) and the Midstream and Downstream Petroleum Regulatory Authority (the ‘Authority’) would replace the multitude of regulating bodies (the DPR, Petroleum Inspectorate, the Petroleum Products Pricing Regulatory Agency, the Petroleum Equalisation Fund, among others) and must consult each other on new regulations or amendments. Such structural reforms create a clear separation between NNPC Limited’s operations as a commercial entity and the regulatory roles to be exercised by the regulatory authorities, allowing for more transparent oversight.

About two decades ago, Nigeria launched its goal of achieving gas-based industrialisation in the country. Whilst this goal was largely left unachieved, the need to actualise this goal became even more urgent in the years that followed. Over the past decade, Nigeria has continually buckled under several bouts of oil-induced economic recession, a near-stagnant industrial sector due to epileptic power supply, and the increasing unaffordability of Petroleum Motor Spirit (PMS) in the domestic market.

Requirement for Companies and Taxation of Income from Petroleum Operations
With the introduction of the PIA, a company shall not be involved in more than one stream of petroleum operation (i.e. Upstream, Midstream and Downstream sectors) and would have to register a separate company for each stream of petroleum operations.

Host Communities
The definition of host communities is contentious; as “host communities” are no more restricted to the oil-producing areas alone but includes communities where pipelines pass through. Under the Act, non-oil producing states that have pipelines passing through them will now be beneficiaries of the percentage allocation for that purpose. That automatically grants some northern states the status of oil producers.

Also, any company granted an oil prospecting licence or mining lease or an operating company on behalf of joint venture partners (the settlor) is required to contribute 3% - 5% (upstream Companies) and 2% (other companies) of its actual operating expenditure in the immediately preceding calendar year to the host communities development trust fund. This is in addition to the existing contribution of 3% to the NDDC. The Fund is tax-exempt and any contributions by a settlor is tax-deductible.

Introduction of a new tax regime and tax rate
The Act proposes to replace the existing Petroleum Profits Tax (PPT) with the National Hydrocarbon Tax (NHT). Companies engaged in upstream petroleum operations will now be subjected to a dual income tax regime, i.e. the Hydrocarbon Tax (HT) and the Companies Income Tax (CIT). While the applicable CIT rate will be in line with the provisions of the CIT Act (rate of 30%), the NHT rate will be graduated and dependent on the area of operation and the period the mining lease was granted. The rate is as stated below

Fiscal regime	Onshore	Shallow water	Deep offshore
New acreage	42%	37.5%	5%
Converted acreage	22.5%	20%	10%

The Act also provides that NHT shall not be payable on associated and non-associated natural gas, as well as condensates and natural gas liquids produced from non-associated gas in fields or gas processing plants, regardless of whether the condensates or natural gas liquids are subsequently comingled with crude oil. However, HT will apply to crude oil, condensates and natural gas liquids produced from associated gas. Further to this, the Act provides that a newly incorporated company that is yet to commence bulk or disposal of chargeable oil is now required to file its audited accounts and returns within 18 months from the date of its incorporation.

Ascertainment of Assessable and chargeable profits for HT and CIT Purposes
The PIA places restrictions on the deductibility of expenses and amends several of the provisions in the PPTA as it relates to ascertaining the assessable profits of companies with upstream petroleum operations. The proposed changes include the following:

I. Introduction of the reasonability test for deductibility of expenses incurred for HT purposes. This is in addition to the requirement under the PPT Act for allowable expenses to be wholly, exclusively and necessarily incurred, to be tax-deductible.

II. Royalty expense will only be deductible in ascertaining the HT payable after it has been incurred and paid. This is a deviation from the accrual basis for royalty deduction under the PPT Act.

III. Education tax, bad debt, bank charges, cost incurred by affiliates, arbitration/ litigation cost, penalties, natural gas flare fees and taxes paid on behalf of another person will not be deductible expenses for the purpose of determining the HT payable.

The PIA introduces new provisions to apply to such companies, in addition to the provisions of the CIT Act. For instance, rents and royalties incurred and paid, contributions to abandonment and host community funds, and other deductions that may be prescribed by the Ministry of Finance will be deductible expenses. However, signature bonuses paid for the acquisition of rights, penalties and gas flare fees will not be deductible expenses for CIT purposes.

Therefore, companies will have to pay particular attention to the computation of their HT and CIT payable, given that certain expenses such as bad debt and bank charges that are not deductible for HT purposes are tax-deductible when determining the CIT payable.

Royalties
All production of petroleum, including production tests, shall be subject to royalties. For royalty purposes, condensates shall be treated as crude oil and natural gas liquids shall be treated as natural gas. The rates are:

Production Terrain	Royalty Rate
Onshore	18%
Shallow Water (up to 200m)	16%
Deep Offshore (greater than 200m)	10%
Frontier Basins	7.5%

Last year, The royalty rate for natural gas in onshore area is 7.5%, while the rate for every other area and for gas produced and utilized in-country is 5%. For Deep offshore fields with production during a month of not more than 15,000 barrels per day, the royalty rate will be 7.5%. Production above 15,000 barrels per day will be at the rate specified in the table above. Royalties for onshore fields and shallow water fields during a month shall be calculated on a tranche basis as shown above.

Stringent Penalty Regime
The penalties for defaults or offences committed under the fiscal framework of the PIA increased significantly. These include:
I. An increase in penalties for not filing income tax returns from NGN10,000 on the first day of default and NGN2,000 for every other subsequent day to NGN10,000,000 and NGN2,000,000, respectively.

II. With regards to penalties on non/late payment of tax, the company will be subject to a penalty of 10% and interest at the prevailing LIBOR or any other successor rate plus 10% as against the previous rate of 5%.

III. A person who fails to comply with the provisions of any regulations therein for which no specific penalty has been provided shall be liable to an administrative penalty of NGN10,000,000. Where default continues, there would be a further administrative penalty of NGN2,000,000 or such sum as may be prescribed by the Minister of Finance.

Production incentives
In place of the current Investment Tax Credit (ITC) and Investment Tax Allowance (ITA) as applicable, there will be a production allowance for crude oil production by leases which are converted to oil mining leases based on a conversion contract and their renewals which is the lower of US$2.50 per barrel and 20% of the fiscal oil price. The production allowance for new acreages will be determined as follows:

I. For onshore areas, the lower of US$8 per barrel and 20% of the fiscal oil price up to a cumulative maximum production of 50 million barrels from the commencement of production and the lower of US$4 per barrel and 20% of the fiscal oil thereafter.

II. For shallow water areas, the lower of US$8 per barrel and 20% of the fiscal oil price up to a cumulative maximum production of 100 million barrels from the commencement of production and the lower of US$4 per barrel and 20% of the fiscal oil thereafter.

III. For deep offshore areas, the lower of US$8 per barrel and 20% of the fiscal oil price up to a cumulative maximum production of 500 million barrels from the commencement of production and the lower of US$4 per barrel and 20% of the fiscal oil thereafter.

Furthermore, the Gas utilisation incentives will apply to midstream petroleum operations and large-scale gas utilisation industries. An additional 5-years tax holiday will be granted to investors in gas pipelines.

Abandoned Wells or Pipelines
The PIA requires that necessary and adequate provisions be made for the decommissioning and abandonment of onshore and offshore petroleum wells, installations, structures, utilities, plants and pipelines for petroleum operations and shall be conducted in accordance with international best practice and guidelines by the Commission or the Authority. This exercise shall take place with the approval of the Commission or the Authority, as applicable.

The PIA requires that each lessee and licensee shall set up and maintain a decommissioning and abandonment fund, which shall be held by a financial institution that is not an affiliate of the lessee or licensee. The fund so set up, will be used for abandonment and decommissioning purposes. Where the licensee or the lessee fails to comply with the abandonment plan, the Commission or the Authority will access the fund for this purpose.

Shortcomings

For existing companies, the new fiscal regime will only start to apply upon renewal of existing Oil Mining Leases (OMLs) and Oil Production Licenses (OPLs) or the execution of new ones. Therefore, it is important for companies engaged in petroleum operations to conduct a PIA impact assessment to decide whether to adopt the fiscal regime of the PIA, prior to the due date of mandatory adoption (i.e. expiration and renewal of existing OMLs and OPLs).
Despite the positive aspects highlighted, the PIA ultimately fails to account for climate change, acknowledge the Paris Agreement, and address the need for diversification to adequately prepare Nigeria for the energy transition that is already underway.
Considering the significant capital requirements for new projects in the oil and gas industry, restrictions on the deductibility of some valid operating expenses may discourage investment in this industry thereby stripping one of the major aims of attracting investment in the sector.
Although the PPT was expunged and replaced with NHT & CIT for companies engaged in upstream petroleum operations, this might not be as incentivizing as it seems as it may lead to overall higher taxes for an organization engaged in both oil and gas operations.
The Act failed to accede to the request of representatives of host communities that they are allocated 10 percent on the grounds that three percent is not enough to improve the standard of living of their people and correct the already significant damage done to their environment.

In conclusion, it is therefore essential that all stakeholders get acquainted with the changes in the Act in order to ensure that the law accomplishes its main objective of reforming the industry for the collective good and sustainable future of all Nigerians. By ensuring an enabling environment for investors backed by a transparent and strengthened regulatory framework, the PIA will present significant investment opportunities for both regional and international stakeholders.

Author

Olakanye Oluwatobi | Research Analyst, Revenue | o.o@borg.re

The Nigerian Music Business: The Rights of Copyright Owners in The Industry

2021-08-08T06:13:31+00:00

Legal | Policy Insight.x

The Nigerian Music Industry has in recent times, given the country something to brag about. The success achieved by contemporary artistes, singers/songwriters and even producers in the past 20 years cannot be overstated. The economic achievements have also been bounteous and there has been a constant upslope in terms of participation and revenue in the industry. It gets better every year.

An industry as successful as this comes with a lot of issues and disputes relating mostly to copyright infringements and intellectual property matters generally, and also disputes arising from contracts/agreements between artistes and record labels, producers or even other artiste in a collaborative project (feature).

This paper provides an insightful discourse about the Nigerian music industry, what it has become today, the concept of musical works and sound recordings, the exclusive rights of authors and disputes arising from incidences of infringement of copyright as it relates to the music scene in Nigeria.

Download the full Insight here

Makuachukwu Okafor | contact: here

Disclaimer

The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of borg.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy.

\u00a92021 borg. Legal & Policy Research

On The Journey to Nigeria’s Startup Act

2021-08-05T09:04:20+00:00

Technology and Digital Economy

This article takes a look at the discussions and steps taken towards enacting a startup bill for Nigeria, which comes after the enactment of similar legislation in Tunisia and Senegal, and is steadily becoming the response of decision-makers in addressing the problems facing startups on the African continent. We also considered possible areas to be addressed by the Nigerian startup bill.

Nigerian startups are attracting more and more investment. In 2019, the country ranked with $663.24 million worth of startup investments. In 2020, her startups raised approximately $120.6 million, with $85.8 million of the total figure from foreign investors. Statistics also show that in the first quarter of 2021 alone, Nigerian tech startups raised $219 million, an amount that tripled the combined amount raised in the corresponding quarters for 2018, 2019, and 2020, respectively.

On another level, the foregoing statistics point to the rise of startup investment on the African continent. According to a 2019 African Venture Capital Report released by WeeTracker, startups operating on the continent received a total of $1.34 billion in startup investments for that year. Despite the global lockdown due to the COVID-19 pandemic, African tech companies still clinched an impressive $757.29 million in 478 deals in 2020, compared to the 427 deals secured in 2019. Furthermore, a report by BCG shows that “from 2015 through 2020, the number of African tech startups receiving backing grew at a 46% annually clip - some six times faster than the global average”

However, despite the encouraging statistics of startup investment in Nigeria, there are many challenges that still threaten the growth of startups in the country, making it difficult for them to scale. In a virtual ecosystem town hall that held in May 2021 to discuss the topic, “Making laws work for startups in Nigeria,” the following problems were identified as affecting startups in Nigeria: disruptive regulations (or outright government competition), fragmented and unclear rules, weak infrastructure (broadband, open data and digital platforms), and difficulty accessing capital for prototyping and growth.

In some other countries, startup acts have been deployed to address these issues. Startup Acts include an amalgamation of policies intended to increase the incentives for young people to start a venture, investors to put their money into promising companies, and other ecosystem actors to lend their support where it’s needed. As pointed out by i4Policy, startups acts are not made through regular lawmaking processes but are a result of entrepreneurs taking the initiative. In Nigeria, the balls have started rolling in this regard, as discussions for the enactment of a startup act are well underway between startup owners, investors, and government representatives.

The startup bill for Nigeria comes right after the enactment of a startup Act in Tunisia and Senegal. From conversations held by key players, Nigeria is not taking this step simply to jump on the bandwagon, but because it is believed that a startup act is the right step to take in order to create a more stable regulatory environment, as well as provide the resources needed for startups to thrive in the country.

Its 2019 report also showed Kenya and Nigeria as the premier investment destinations on the continent for that year, attracting US$149 million and US$122 million in funding respectively.

A look at the Startup Act in Tunisia

In Tunisia, the government is taking active steps to make the country a hub of startup investment, which will, in turn, grow the economy. Tunisia passed her startup act on April 2, 2018, as part of the government’s strategy to boost socio-economic development and expand technological infrastructure. The Tunisian startup act was developed in a participatory and collaborative way by all stakeholders of the entrepreneurial ecosystem in Tunisia under the supervision of the Ministry of Communication Technologies and the Digital Economy.

The Act provides the criteria to be met by companies in Tunisia that seek to be granted the Startup Label. The criteria to be met are: Age (the company must be less than 8 years old since its legal constitution); Cut (the company must have less than 100 employees and less than 15 million dinars of annual turnover); Independence (more than 2/3 of the company’s capital must be held by natural persons, regulated investment bodies or foreign startups); Innovation (the company’s economic model must be innovative); and Scalability (the company’s target market must be large and homogenous, must have a market-fit solution and the team in charge capable of implementing the project properly).

Statistics also show that 21.9% of the labelled startups as of 2020 had female founders and $18.5 million has been raised by the startups combined.

Upon being granted the Startup Label, startups can have access to the incentives and benefits provided under the Act. Some of the incentives available under the Act include

(i) the startup grant, which is an allowance given to the co-founder and shareholder of a startup to cover living expenses for one year; (ii) the startup creation leave of one year which is granted to the co-founder of the startup to enable him to dedicate himself full-time to the launch and development of his startup. He may terminate the leave at any time and return to his original job with prior notice; (iii) exemption from corporate tax: in the event of liquidation, the Act provides measures such as a Guarantee Fund and exemption from corporate tax; (iv) tax relief is granted to investors who invest in startups or in regulated investment organizations dedicated to startups; and (iv) exemption from capital gains tax: profits from the sale of securities relating to participation in startups are exempt from capital gains tax.

The Startup Act in Tunisia has been celebrated for positively impacting the startup ecosystem in the country. First, the Act has made it easy for startups to be given the startup label. From the enactment of the Act in 2018 to November 2019, the country had 169 labelled startups. As of August 2020, 327 startups had received the startup label, which entitles them to the benefits given to startups. Statistics also show that 21.9% of the labelled startups as of 2020 had female founders, and $18.5 million has been raised by the startups combined. According to Ali Mnif, co-founder of MAZAM, and also one of the lobbyists of the Tunisian startup Act, “(the Act) pushed some to make a jump they wouldn’t have made. It empowered some others. It inspired many more.” No doubt, this was the right boost needed for public and private engagement in terms of investment. In 2020, the country ranked top five in the list of MENA countries in terms of the number of investment deals.

The Senegalese government also formed the Delegation de l’Entrepreneuriat Rapide (DER) which is aimed at boosting entrepreneurship by addressing the lack of early support systems, accelerators and early-stage funding for startups.

The Startup Act has also been praised by startup owners for its attempt to deal with the bottlenecks that threaten the growth of startups in the country. According to them, by dealing with the external challenges involved in growing a startup, the Act has enabled them to pay more attention to product development and growing the right team. Some other startup founders have praised the incentives and benefits provided under the Act, such as the tax holiday, the one-year salary grant, and the Special Currency Account. The result of these incentives, according to Sofiane Mabrouk, co-founder of Fabskill, is that several seniors from the Tunisian diaspora are coming back to launch startups, and that the tax exemptions have particularly benefitted smaller startups where the general tax structure would ordinarily crush them.

In 2019, the Global Entrepreneurship and Development Institute (GEDI) published its Global Entrepreneurship Index, which ranked Tunisia second in Africa based on 14 values measuring the health of the ecosystem (including entrepreneurial attitudes, abilitie,s and aspirations). It can be concluded from the foregoing that the creation of the Startup Act was a step in the right direction for Tunisia. The Act and the results flowing from its implementation have helped draw global attention to the country’s startup ecosystem. The creation of the Act was made possible by the painstaking efforts of the ecosystem’s key players in drawing up the legislation, as well as the strong political support of the Tunisian government.

The Startup Act in Senegal

The Senegal Startup Act was passed into law in December 2019 to positively impact the national economy in line with the Digital Senegal 2025 Strategy. The implementation of the Act led to the amendment of the country’s Finance Law in order to make provision for certain things, such as the exemption from taxes for the first three years of a startup and a reduction in registration fees. The Senegalese government also formed the Delegation de l’Entrepreneuriat Rapide (DER), which is aimed at boosting entrepreneurship by addressing the lack of early support systems, accelerators, and early-stage funding for startups. The Delegation has so far invested more than $2 million in more than 40 Senegalese startups. Other countries like Mali, Ghana, and Rwanda are also on the journey to enacting their own startup acts.

Current Developments with the Nigerian Startup Bill

Moving back to Nigeria, the timelines for the drafting and implementation of the startup bill has been published on the Nigeria Startup Bill website. The timeline is as follows:

June 2021: Produce the First Draft.
Harmonize existing laws/regulations and feed inputs to the legal framework from key ecosystem leaders (MDAs, States, and Networks).

July 2021: Validate the First Draft.
Ecosystem leaders and representatives review the first draft as well as the Presidential Working Group composed of MDA decision-makers critical to implementing components of the bill.

August 2021: Town Halls.
Presidential Announcement and Town Hall meetings take place for public consultation and validation of the second draft of the bill with ecosystem stakeholders at the state level in all geographical zones.

September 2021: Final Draft Produced.

Drafting teams take all the inputs and make revisions to feed into the final bill.

a Growth Board has been added to the Nigerian Stock Exchange, meant for small businesses and startups. It serves as an alternative IPO exit route for startups and would give them an opportunity to raise equities for their businesses.

Leaning in on the challenges that startups face in the country, some possible provisions for the startup bill include:

Tax incentives for startups for up to 3 years from the date of their creation, to enable them to have a firm financial footing in the beginning stages of the startup.

Specific provisions tailored to attracting more women founders onto the startup scene. The startup bill can be the boost needed to encourage greater female participation in the startup community, as was achieved with Tunisia’s startup act.

Tax relief for investors, both local and foreign, who invest in startups or VC firms. Such relief could include tax exemptions for when a company invests a certain amount of its profits into startups.

A simplified registration process for startups. Making use of online registration portals rather than the traditional physical registration system will help eliminate time wastage in the registration process. Also, registration fees (if any) should not be costly.

Establishment of research centers across the country to aid research in various sectors of the startup ecosystem. This will spur innovation and will help local startups apply the best practices in their various fields.

Establishment of a supervisory body to measure the growth of startups, supervise their compliance with extant laws and regulations, and recommend policy changes where needed.

Consolidation of the existing legislation supporting startups.

Various legislations already exist that support the growth of startups in the country. One example is the Venture Capital Incentives Act which provides tax exemptions for equity investments made by venture capital companies in a startup in Nigeria. There is also a pioneer status tax incentive for innovative business models granted for an initial period of 3 years, with a possibility of an extension for another 2-year period.

Furthermore, a Growth Board has been added to the Nigerian Stock Exchange meant for small businesses and startups. It serves as an alternative IPO exit route for startups and would give them an opportunity to raise equities for their businesses. Several government funds also exist to support both startups and venture capital firms. Some of these funds include Creative Industry Financing Initiative and the Future Generations Fund under Nigeria’s Sovereign Investment Authority.

Calls have been made for stakeholders to give their contributions to the startup bill. The method adopted for the bill is the “Big Tent” approach which is a collaborative effort by all the relevant players in the ecosystem. The project is managed by the Ventures Platform Foundation and supervised by the Presidential Strategic Advisory Group composed of stakeholder representatives from the tech-startup ecosystem in Nigeria. The effort is also supported by i4Policy, which has been instrumental in helping African countries with the draft of their startup laws. According to Jon Stever, managing director of i4Policy, “...in a few years the question will be, “how many countries don’t have Startup Acts?”

In Nigeria, if the startup bill is to be successful, it must be backed by strong political support. Going by the words of the President in his New Year address, “our young people are our most valuable natural resource, at home and abroad. Their ingenuity, creativity, innovation and entrepreneurial spirit is evident to all. We will partner with the legislature to develop an enabling environment to turn their passions into ideas that can be supported, groomed and scaled.”Also, the bill must reflect our economic realities and unique conditions rather than wholly lifting provisions from startup acts in other countries. Furthermore, the bill must holistically reflect the input from all relevant key players in the ecosystem.

Finally, one question that remains to be answered is how healthy the environment is for the implementation of the bill, considering the ban on Twitter and the ban on the facilitation of cryptocurrency by Nigerian banks. Whatever the case, it is the hope of stakeholders that the startup bill will be the key needed to make the grounds smoother for the operation of startups in the country.

Author

Emaediong Lawrence | Research Analyst

Covid - Vaccine - Patent - Waiver

2021-06-15T13:55:35+00:00

Legal | Policy Insight

An overwhelming surge in COVID-19 cases in India last month stalled the distribution of COVID vaccines to low and middle-income countries under the COVAX facility which had been previously hailed as the fulfillment of the promise “to ensure people from less wealthy countries are not left behind in the race for life-saving vaccines”.

The stagnation of the COVAX initiative invited renewed attention to the contentious petition jointly presented by India and South Africa to the World Trade Organisation for a waiver of some Intellectual Property (IP) rights to allow for the local manufacturing of vaccines developed elsewhere.

This paper seeks to provide the legal context to the petition. The first section will provide a brief overview of IP rights to people new to the field. The initiated may skip to section 2 which discusses the agreement on Trade-Related Aspects Of Intellectual Property Rights (TRIPS) waiver.

Download the full Insight here

Sam Kwadwo Owusu-Ansah | Research Analyst, Transnational Policy | s.o@borg.re

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92021 borg. Legal & Policy Research

Redirecting Funds Towards Healthcare in Nigeria.

2021-05-21T09:32:18+00:00

Governance and Institutions

The poor state of healthcare in Nigeria can be attributed to a host of reasons, chief among these reasons is the lack of adequate funding in the sector. This issue brief looks at some funds that can be redirected towards funding healthcare in Nigeria.

Issue-Brief | Abiona Adekunle

Just recently, the National Association of Resident Doctors went on an indefinite strike to protest poor working conditions and pay - leaving hundreds of patients stranded. While resident doctors went on strike in Nigeria, President Muhammadu Buhari travelled to the United Kingdom to get the best medical care.

The state of healthcare in Africa’s most populous nation is nothing to write home about as the sector is plagued with multifarious issues. Chief amongst these problems is the fact that the health sector is underfunded. Against the backdrop of the pandemic year, one would have thought that the Nigerian Government learnt a thing or two but sadly the total allocation to the health ministry (including statutory allocations) for 2021 was just 4.4% of Nigeria's annual budget. This figure is 4% less than the 2020 allocation and also lower than the last 5-year average of 5%. This is contrary to the Abuja Declaration which called for the allocation of a minimum of 15% of the national budget to health.

For a country that was once the standard of the black race in the country, Nigeria’s fall from grace is mirrored perfectly by the health sector. A once-booming industry, so glorified that even it had Saudi Royalty reportedly visit for medical check-ups, the present situation of Nigeria’s health sector is rather pitiful. A 2018 study in the Lancet of global health care access and quality ranked Nigeria 142 out of 195 countries.

The health sector as with every other industry in every country needs adequate funding to survive and indeed thrive. What happens when such an important sector is not adequately funded is the obvious reality of present-day Nigeria. A reality that sees medical personnel leave the country in their droves and sees thousands of citizens (including the President) seek health solutions in other countries. Fortunately, this reality can be remedied by strategically distributing resources and funds into the sector. In a country like Nigeria where the misappropriation of funds is the order of the day, the ideal distribution of resources will go a long way in improving the health sector.

Some Revenue that can be channelled into healthcare

Healthcare can be appropriately funded in Nigeria if resources in the country are redistributed adequately. Some of the areas where funds need to be re-distributed to allow for adequacy will be discussed below.

The COVID 19 pandemic exposed the frailties of Nigeria’s healthcare system to the extent that there was a mass shortage of oxygen and bed at various hospitals at isolation centres.

Cutting unnecessary tax incentives

Nigeria is losing a lot of money from multiple poorly administered tax incentives system, which reduces our capacity to fund critical infrastructure like health care. Studies confirm that tax incentives have more negative than positive impact on sustainable development in developing countries. It is counterintuitive to expect an increase in revenue by granting tax waivers that hamper our revenue base. In 2016, a report revealed that $US3.3bn were given as incentives to IOC’s through generous tax breaks. Eliminating or streamlining a number of these incentives granted to corporations doing business in Nigeria could help reserve funds for investing in healthcare.

Reducing legislative Spending

In Nigeria, a legislator’s hazard allowance is pegged at a whopping 1.2 million naira while that of a medical practitioner at a paltry 5,000 naira. It has been reported that Nigerian federal legislators are the second-highest paid in the world with each senator earning around $597,000 per year. This results in a total of ₦20 billion ($65 million) per year and ₦79 billion ($260 million) at the end of each legislative tenure. For a country that is regarded as the poverty capital of the world, this is wasteful spending. It is therefore ironic that it still runs an extremely expensive legislative body.

The legislative arm of the country has been constantly accused of being insensitive, and for good reason, the body consistently receives way more resources than it should. Funds that otherwise could be utilised in improving the country, and particularly the health sector. The harrowing contrast of the legislature and the dying health system is seen in the remuneration between both. This and more are also many more areas where funds are misused. Thus, a redistribution of funds from the expensive legislative arm will also help in whatever way possible to improve healthcare, and healthcare funding in the country.

Recovered funds

Since the turn of the century, and indeed, the 4th republic, different administrations have worked to recover funds carted away to foreign countries by past leaders. Nigeria has recovered a total of $3.6 billion stolen by the former Head of State, General Sani Abacha from 1998 to 2020. However, there is no public information on how the government utilised the recovered funds. That said, a proposal of pumping a fraction of these recovered funds into the health sector is advised

Blocking revenue leakages in our Ports

In March, it was reported that Nigeria loses about N800 billion monthly due to a lack of 24-hour seaport operation. Additional revenue is also lost to the bad roads leading to the seaports in Lagos. Despite efforts to fix this situation, it has continued to exist therefore leading to a loss of revenue which could be channelled into other areas of the sector for growth. For instance, if the government and the port operators could get this right, such funds could be channelled into purchasing necessary equipment into hospitals nationwide or even paying salaries for medical personnel.

Conclusion

Nigeria must take steps to prevent an already impending crisis in its health sector. The COVID 19 pandemic exposed the frailties of Nigeria’s healthcare system to the extent that there was a mass shortage of oxygen and bed at various hospitals at isolation centres. One would have expected that the government will take immediate steps to improve the sector but so far nothing appears to have been to fix this. The remuneration of healthcare workers must be addressed immediately to ensure the well being and welfare of our medical personnel.

Author

Abiona Adekunle | Research Assistant, Governance and Institutions | k.a@borg.re

Education In Nigeria – Policy Bane And Porous Standards

2021-05-13T11:18:39+00:00

Insights

The saying, “Education is the best legacy” is one that has stood the test of ages and remained true over time. Education is the bedrock of growth and development because it produces people who can think independently, rationally assess problems and objectively churn out solutions. Asides from its effect on leaders, it may be the magic wand for grooming citizens who turn out to participate in the positive growth of the nation.

The increasing revolution in education in several parts of the world especially in the age of technological advancement has in a good sense, developed the world’s process of thinking and addressing situations but it has unfortunately also revealed the stunted nature of education policies and actions in many other countries – including Nigeria. Nigeria, for instance, has never allocated the required 15 – 20% budgetary allocation to education and has only come close to this UNESCO requirement in 2015 with the allocation of 10.7% of its budget to education.

In the Appropriation Act of 2021, Nigeria has allocated only 5.6% budget to education – the lowest recorded since 2011. This has come at a time when institutions of learning are starved of infrastructure, teachers have gone unpaid for months and the pandemic now beckons on institutions of learning to adopt high-level technology to make teaching and learning possible.

Download the full Insight here

Elizabeth Nwareuze | Research Analyst, Education Policy | e.n@borg.re

Regulating Open Banking in Nigeria

2021-05-08T06:29:16+00:00

Legal | Policy Insight.

The Open Banking system utilises open technologies that permit third-party providers (TPPs) to develop services and applications around financial institutions providing end-users the ability to review all their banking and financial information such as inflows, outflows, balances, and due liabilities in a central location. Thus, Open Banking is the exchange of consumer data between banks and other Financial Service Providers (FSPs) on the basis of a Customer’s consent with other FSPs and TPPs.

With Fintech in Nigeria thrusting the envelope of traditional banking and the growing integration of banks and other financial institutions including the increasing adoption of API-based integration rapidly revolutionising the financial services landscape.

On February 17, 2021, the CBN issued a regulatory framework for open banking in Nigeria which aims to enhance financial inclusion, improve competition within the financial services space, foster the sharing and leveraging of customer-permission data by banks with third-party firms to devise solutions and services that provide efficiency, enhance financial transparency and create options for account holders across Nigeria to interact within the financial system.

Thus, the provision of an enabling regulatory environment for innovative and customer-centric financial service through safe utilisation and exchange of data and service is the main crux of open banking.

Download the full Insight here

Oluwayemisi Adeluoye | Research Analyst, Banking and Finance | y.a@borg.re

More Seats for Women in the Parliament: Tokenism and the Cost Implication

2021-05-07T11:17:19+00:00

Recently, the House of Representatives introduced a Bill to improve gender equality within the Federal and State Legislative Houses by creating an additional 111 legislative seats. We examined the Bill, its practicality, and the impact on the cost of governance.

Governance & Political Institutions | ISSUE BRIEF

Gender equality has been correctly described as the cornerstone of inclusive growth, good governance, and sustainable development. Therefore, private and public institutions across various jurisdictions have adopted policies aimed at ensuring gender equality. Broadly, these policies can be categorised as affirmative actions and are targeted at ensuring an increase in the representation of women in areas where they are unrepresented, such as policymaking, governance, and education.

Despite recognising gender equality as an indispensable feature of democratic societies, the Nigerian political atmosphere reflects a failure to implement proper affirmative actions to ensure gender equality in policy and law-making. Even laws and policies, which seeks to ensure gender equality and preclude gender-based discrimination, are more honoured in the breach than the observance.

Only 4% of federal lawmakers in Nigeria are women, a total of 21 out of 469. The 9th Senate, comprised of 109 duly-elected senators, only has eight female senators, while the House of Representatives only has 13 women out of the elected 360 officials.

In an attempt to cure this abnormality, the House of Representatives introduced the Constitution of The Federal Republic of Nigeria, 1999 (Alteration) Bill, 2021 (The Bill) to improve gender equality within both legislative houses by increasing the number of legislative seats. This issue brief will concisely examine the Bill, its practicality, and its impact on the cost of governance.

What the Bill Says

The Bill titled, "A Bill for an Act to alter the provision of the Constitution of the Federal Republic of Nigeria, 1999, to create additional special seats for women in the federal and states legislative houses; and for related matters", sponsored by the Deputy Chief Whip of the House of Representatives, Hon. Nkeiruka Onyejeocha the Bill has passed the second reading and has been referred to the Ad hoc committee on Constitution Review for further legislative action.

The composition of the legislative houses is regulated by the Constitution of the Federal Republic, 1999. Pursuant to section 48, the Senate comprises 109 senators, consisting of three from each State and one from the Federal Capital Territory, Abuja. Likewise, Section 49 provides that the House of Representatives shall consist of 360 members based on the population size of each State. The Bill seeks to amend the above provisions to create 37 additional Senate seats, comprising of one for each state, including the FCT. The Bill also seeks to establish 74 additional, comprising of two seats at the House of Representatives for each State and the FCT; a total of 111 Federal legislative seats.

Similarly, the Bill seeks to amend sections 71, 99, and 117 on the composition of State Legislative Houses. Notably, the Deputy Chief Whip, Hon. Nkeiruka Onyejeocha, in the lead debate on the Bill, added that it is a temporary measure, which will be subject to review after four general election cycles of 16 years.

An Unorthodox Approach to Gender Equality

As mentioned earlier, gender equality is the cornerstone of good governance and is essential in achieving the Sustainable Development Goals by the year 2030. Nonetheless, gender equality in governance remains a myth, and data indicates that women remain underrepresented across all levels of policy-making globally. Currently, only four countries have attained equality with 50% or more women in their parliaments, with Rwanda having the highest number at 61%. Conversely and alarmingly, there are over 25 states in which women account for less than 10% of their parliaments, with few countries having no women at all.

Nations have modeled their laws and gender policies using affirmative action to achieve gender equality. What originated as an instrument of racial equality has evolved as a viable tool to address inequality for all minority groups, including women. As a tool for ensuring gender equality, affirmative action for women is inextricably linked with Article 8 of the United Nations Charter and the Beijing Platform of Action (BPA).

The Bill may be correctly described as one of such moves to address the apparent inequality in the legislative houses. There are nonetheless significant problems arising, notably, the increased cost of governance.

An examination of the Appropriation Act, 2021 reflects a total expenditure of N13.588 trillion and total revenue of less than N8 trillion, thus resulting in a deficit of approximately N5.6 trillion, which is inherently reflective of fiscal irresponsibility. The cost of governance has become a source of concern with justifiable clamour by citizens for a reduction, as up to 43% of the country's population live in extreme poverty.

Despite the alarming poverty rate, Nigeria has some of the highest-paid legislators in the world, and approximately N128 billion was allocated from the 2021 National Budget for the legislative houses, in spite of the pandemic. In light of the above, the Bill, which seeks to create an additional 111 legislative seats, is expected to further spike the already alarming governance cost.

Additionally, the Bill, beyond increasing the cost of governance, is mere tokenism, as while there is a need for more female lawmakers, Nigeria does not need more lawmakers. The unorthodox approach in the Bill is inherently detrimental to the fight against gender inequality in governance.

In order to enhance gender parity within the Nigerian legislature and encourage more women's involvement in politics, the real long-term work should be addressed at political party structures. It is necessary for political parties to make recruiting and supporting female candidates a priority. If the political parties made gender parity an issue of significance within its ranks, more women will be involved in participatory politics, instead of the bare tokenism, this Bill proposes.

It is recommended that amendments are directed at laws that govern party organisation, encouraging gender consciousness in party leadership and administration.

Gender equality is indispensable to achieving sustainable development. Nonetheless, data reflects aggressive underrepresentation and discrimination against women in governance. While bridging this gap is crucial, strategies and policies made to bridge this gap must be well-considered, including the consideration of peculiar factors, in this instance, the increased cost of governance is too high a price to pay.

This issue brief was provided by

Rachel Ogidan | Research Analyst, Governance and Institutions | r.o@borg.re

Our issue-briefs provides a platform for commentaries on knowledge surrounding a current relevant local or transnational discussion.

From Crude to Gas: Actualising Gas Transition In Nigeria

2021-04-16T15:13:30+00:00

Energy Policy

In a bid to provide a viable alternative, both for the country’s oil-dependent economy and its struggling citizens, the Federal Government recently launched quite a number of ambitious gas expansion and utilisation goals. We looked at some internal strategies that can be adopted before they can be actualised.

About two decades ago, Nigeria launched its goal of achieving gas-based industrialisation in the country. Whilst this goal was largely left unachieved, the need to actualise this goal became even more urgent in the years that followed. Over the past decade, Nigeria has continually buckled under several bouts of oil-induced economic recession, a near-stagnant industrial sector due to epileptic power supply, and the increasing unaffordability of Petroleum Motor Spirit (PMS) in the domestic market.

About two decades ago, Nigeria launched its goal of achieving gas-based industrialisation in the country. Whilst this goal was largely left unachieved, the need to actualise this goal became even more urgent in the years that followed. Over the past decade, Nigeria has continually buckled under several bouts of oil-induced economic recession, a near-stagnant industrial sector due to epileptic power supply, and the domestic market's increasing unaffordability of Petroleum Motor Spirit (PMS).

In a bid to provide a viable alternative, both for the country’s oil-dependent economy and its struggling citizens, the Federal Government recently launched quite a number of ambitious gas expansion and utilisation goals, including increasing the country’s LPG consumption capacity from 1 million tons in 2020 to 5 million metric tonnes in 2022 and converting 1 million cars to Compressed Natural Gas (CNG) by the end of 2021. Whilst these goals are an indication of the federal government’s commitment to gas utilisation, the question of how it plans to actualise such a widespread gas transition in the country has largely remained unanswered.

Nigeria is not the first country to seek out gas utilisation. Iran, Brazil and India have successfully boosted the use of Natural Gas Vehicles (NGVs) in their respective countries. However, taking a look at Nigeria’s LPG performance report for the past two decades, it has been far from impressive. In 2004, the country launched an LP Gas Sector Improvement Study, with the goal of increasing Nigeria’s LPG consumption per capita to an average of 3.7kg. Yet, 17 years down the line, Nigeria’s LPG consumption per capita still stands at a meagre 2.3kg.

Drawing from the economic and environmental benefits of gas utilisation, there is an urgent need to rewrite Nigeria’s poor gas utilisation performance and catapult the country to the global stage as one of the world’s biggest gas players— both in terms of production and utilisation. However, this cannot be achieved without the adoption of intentional strategies.

End Gas Flaring

Every year, thousands of cubic feet of associated gas are flared at Nigeria’s oilfields. The ripple effect of such a large-scale flaring extends far beyond huge economic losses. It has largely undermined Nigeria’s climate change mitigation efforts, continuously crippled the development of gas resources, and grievously endangered the health of members of host communities. In spite of the fact that 2020 was declared as the deadline for routine flaring in Nigeria, the country still flared about 318 million cubic feet (mmscf) at the end of 2020. This volume of flared gas could singlehandedly generate about 93197 mwh of electricity—a load that far exceeds Togo’s domestic electricity generation.

Only a meagre 5% of Nigerian households currently use LPG, and CNG is barely used by cars that ply Nigerian roads. As it stands, the major market for natural gas in Nigeria is the Gas-to-Power sector. However, that, in itself, is problematic as it is not exactly a viable market.

Last year, Nigeria kickstarted the bidding process for Nigerian Gas Flare Commercialisation Programme. The program involves auctioning out flare gas from selected flare sites, for bidders to produce the gas and sell to the market. Whilst this program undoubtedly holds huge potentials for reducing flaring activities, its effectiveness has largely been stalled by undue delay and limited organisation.

Investors have reportedly been pulling out due to poor data on the production capacity of flare sites, and huge economic losses occasioned by constant delays. Yet, the bidding process has still not been concluded, several months after it was kickstarted. This delay is highly costly, as it would give room for more flaring, and largely undermine the program’s ability to solve Nigeria’s gas flaring problem. Hence, the Department of Petroleum Resources needs to urgently conclude the program’s bidding process, and give room for immediate gas production, as this is one of the most effective means through which gas wastage can be curbed.

Create a Viable Market

Nigeria is currently brimming with a population of about 200 million people. At first glance, a country with such a massive population will undoubtedly present a juicy market for gas investors. However, this has not been the case.

Only a meagre 5% of Nigerian households currently use LPG, and CNG is barely used by cars that ply Nigerian roads. As it stands, the major market for natural gas in Nigeria is the Gas-to-Power sector. However, that, in itself, is problematic as it is not exactly a viable market.

Over the years, the power sector has positioned itself as a major consumer of natural gas, as Gas-to-Power accounts for the largest share of Domestic Gas Supply Obligations. However, even with the large gas consumption capacity of this sector, the illiquid state of the electricity value chain has put a major strain on the ability to generate companies (GenCos) to pay for the supplied gas. As a result, gas suppliers are faced with constant issues of non-payment for supplied gas by GenCos. For example, just last year, Accugas issued a notice of non-payment on an outstanding debt of $15.8m owed by the Calabar GenCo, for the supply of natural gas.

Considering the fact that this sector is currently a major demand source in the gas market, more measures need to be adopted to fix the illiquidity of the electricity value chain. This way, a profitable gas market can be created, and investors will be able to receive prompt returns on their investment.

Similarly, wider gas usage can equally be fostered through the launch of a Grassroot Gas Transition Programme which will involve large-scale sensitization on LPG usage and CNG transition processes, as well as the distribution of free LPG cylinders. Ghana instituted a similar measure in 2013, with its Rural Liquefied Petroleum Gas Programme. Since the program’s launch, LPG has been extended to over 149,000 Ghanaian households.

Expand Gas Infrastructure

The Nigerian gas industry currently suffers from a dearth of transmission and distribution infrastructure. CNG and LPG refilling plants are rarely located in close proximity to most Nigerians, and pipeline distribution networks in most regions are poor. For example, in 2018, Nigeria’s gas pipeline capacity was projected at 2.9bscf/d, with a non-existent capacity allocated to the North. In fact, in the same year, about 110777 million standard cubic feet of gas (MMscf) was left unsupplied to the domestic market, due to lack of gas infrastructure.

Whilst the challenge of an inadequate gas pipeline system is set to be considerably tackled with upcoming pipeline projects like the Ajaokuta-Kano-Kaduna pipeline project (which is projected to be completed in 2023), the gas retail distribution network is still extremely weak in most areas. Users often have to walk distances in order to be able to refill their LPG cylinders. This acute lack of infrastructure was the major reason that Ghana’s free cylinder system did not necessarily translate to higher LPG consumption. It was reported that only 8% of the program’s beneficiaries had continued to use the cylinders. This low result was largely attributed to poor LPG access, with users having to travel as far as 25km to get an LPG refill.

Essentially, in order to realise any considerable energy transition in the country, an expansion of the current gas infrastructure needs to be prioritised. This is basically the final push that would incentivize investors and average Nigerians to pull their weight into gas utilisation.

Conclusion

In conclusion, Nigeria’s abundant gas resources and its large population, undoubtedly provide the country with a significant leverage for the successful production and utilisation of gas. With a combination of specially-tailored gas policies, the country will be able to achieve its gas utilisation goals, and equally, maximise the economic and environmental benefits attached to the usage of gas.

Author

Oyin Komolafe | Research Assistant, Energy | k.o@borg.re

The Impact Of Covid-19 On The Nigerian Debt Markets

2021-04-07T07:54:25+00:00

Legal | Policy Insight.x

Since the advent of the COVID- 19 outbreak in 2019, great changes have occurred in the mortality rate, spread and contraction of diseases to every corner of the world and most especially resulted in the downturn of the world’s economy. Most of the countries of the world’s economy and financial markets have been affected due to lockdown in which activities have been put on hold for the time being and the enforcement of social distancing.

This research examines, evaluates and arrives at relevant findings on the impact of COVID-19 on capital markets operations in Nigeria, with a strict focus on the debt profile of companies. It also looks into the prospects of economic recuperation of companies affected by the pandemic, how prospective policies and procedures by government and relevant stakeholders can help ameliorate associated problems and how the goal of economic resuscitation can be achieved in the long run.

Download the full Insight here

Oyeniyi Peace Olu | contact: here

Adetunji Sunday Lawrence| contact: here

Disclaimer

The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of borg.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy.

\u00a92021 borg. Legal & Policy Research

137-1-137.

2021-03-06T19:49:34+00:00

The 2020 elections in Ghana was historic not just because of the record voter turnout but because the parliamentary results ushered in a new paradigm in Ghanaian politics; of the 275 seats in Parliament, both parties won 137 each and the final seat went to an independent candidate. We consider the opportunities the current party organisation in Ghana’s Parliament provides in the quest for truly representative, constituent-centred legislatures.

Mill says of the proper functions of representative bodies is that “the whole people, or some numerous portion of them, exercise through deputies periodically elected by themselves the ultimate controlling power, which, in every constitution, must reside somewhere”. The realisation of the donor-donee relationship that should properly characterize the relationship between members of legislatures and their electors has been the challenge of modern democracies.

Rules of party discipline, in established and fragile democracies alike, have often succeeded in tilting the scales of representatives’ priorities in favour of the political parties upon whose platform they ascended office over the interests of their constituents.

To wit, five of the seven Republican senators who voted to impeach former US President Donald Trump have been censured by the parties with a censure vote scheduled in March for Senator Susan Collins. In the UK, incessant attempts by the Johnson administration to side-step Parliament during Brexit negotiations were reminiscent of, according to some commentators, Lord Hailsham’s fears of the UK descending into an “elective dictatorship”. This article considers the opportunities the current party organisation in Ghana’s Parliament provides in the quest for truly representative, constituent-centred legislatures.

A necessary starting point to understand the significance of the current composition of Parliament is to appreciate the circumstances that led to the drafting of the constitutional provisions pertaining to the legislature as found in Chapter 10 of the 1992 Constitution. Ghana resumed a brief dalliance with presidential democracy following the adoption of the 1979 Constitution under which Dr Hilla Limann was executive president.

However, the 1979 Constitution did not replicate the vast legislative and executive powers that were vested in Dr Nkrumah under the Republican Constitution of 1960.

Thus, despite the People’s National Party commanding a slim majority in Parliament with 71 of the 140 seats, the Limann administration could not avoid “the Achilles’ heel of presidential democracies”, executive-legislative deadlock. The economic downturn and collapse of state services which was occasioned by the stagnation of government business will later form the pretext of the Provisional National Defence Council’s (PNDC) 31st December coup.

Eventually, when the PNDC resolved to revert the country to constitutional rule, it was necessary to insert a provision in the new constitution to ensure government business was not stymied. To cure this deficiency, the Consultative Assembly that drafted the 1992 Constitution decided to adopt the fused elements of parliamentary democracy while maintaining the executive-legislature distinction that defined presidential democracy thereby producing our hybrid system. Article 78(1) of the 1992 Constitution subsequently mandates a majority of Ministers of State to be appointed from Parliament to facilitate government business in the Chamber.

The hybrid system has been a success to the extent that it was created to make the lawmaking process seamless as consecutive Parliaments in the Fourth Republic have successfully enacted several landmark statutes which have, for better or for worse, changed the fates of our country. Nonetheless, the current constitutional arrangement has fomented a “winner-takes-all” style of governance wherein the legislative, oversight and accountability functions of Parliament have been traded for merely rubber-stamping the will of the executive.

In this respect, the opposition is empowered to go beyond mere cosmetic displays of disapproval and ensure that every piece of legislation that emanates from Parliament represents the comprehensive and considered opinion of our elected representatives.

Within this context, the December 7, 2020 elections were historic not least because of the record voter turnout it recorded but because the parliamentary results ushered in a new paradigm in Ghanaian politics, one which the Fourth Republican Constitution could not have envisaged: of the 275 seats available, both parties won 137 each and the final seat went to Hon. Andrew Amoako Asiamah, the independent candidate from Fomena who was a member of the previous Parliament on the ticket of the ruling New Patriotic Party (NPP).

After a heated swearing-in session, it was decided between party leadership to have Rt. Hon Alban Sumana Kingsford Bagbin, a veteran member of the Fourth Parliament from the opposition National Democratic Congress (NDC) assume the position of Speaker, Hon. Joseph Osei-Owusu of the NPP as First Deputy Speaker and Hon. Asiamah as the Second Deputy Speaker. This composition of the Eighth Parliament will be relevant for furthering the interests of constituents in the following ways.

Due to the Second Deputy Speaker formally aligning with the ruling party, committees will be composed based on the approved ratio of 138:137. Nonetheless, this slight lead is unlikely to affect the equal representation of both parties on committees nor the distribution of committee leadership positions among the 4 Standing Committees and the 16 Select Committees whose leadership is not pre-determined by the Standing Orders of Parliament. The equal composition of the Appointments Committee and the Business Committee will seem to affirm this position.

The significance of this development is, perhaps, most apparent in the ongoing vetting of the ministers-designate as members from the opposition will have equal input to determine the principal officers in this administration. Hence, whereas the Joe Ghartey Committee which cleared Hon. Boakye Agyarko of corruption charges during the 2017 ministerial vetting was itself accused of being a show trial, the opposition in this Parliament will be empowered to thoroughly investigate any such allegations and ensure transparency in the vetting process.

Of more significance is the impact this arrangement will have on the primary function of Parliament, lawmaking. It has been the norm within this Fourth Republic for the executive to bulldoze controversial bills through Parliament amidst criticism from the opposition hence the oft-quoted slogan “the minority will have its say but the majority will have its way” has been a favourite amongst Speakers in this Republic. The opposition has usually responded by boycotting votes and staging walkouts.

To wit, the erstwhile Seventh Parliament recorded a total of eleven walkouts with the latest being the passage of the Agyapa Royalties deal in August 2020. The current composition of Parliament obliges the opposition to put their money where their mouths are and block the passage of any law which it deems not to be in the public interest. The corollary to this is that it will encourage the government to mount formidable defences for the Bills they introduce and foster more constructive debates rather than laying Bills in Parliament as a mere formality.

In this respect, the opposition is empowered to go beyond mere cosmetic displays of disapproval and ensure that every piece of legislation that emanates from Parliament represents the comprehensive and considered opinion of our elected representatives.

A related point is the control of budgets. An important function of legislatures is to control government expenditure and ensure the public purse is being put to good use. This is done by the power to approve budgets being vested in the legislature and the activities of Parliamentary Oversight Committees such as the Public Accounts Committee in Ghana and the United Kingdom. The performance of this function in the Ghanaian Parliament has been underwhelming.

Successive governments have managed to pass budgets despite disapproval from the opposition. Indeed, the first national budget presented in the previous Parliament was passed despite being boycotted by the minority. Additionally, recommendations for sanctions to be imposed on persons found culpable of some economic malfeasance by the Public Accounts Committee are not usually implemented due to executive inertia. Consequently, the current composition of Parliament will allow the opposition to streamline the budgets of various MMDAs to prevent over-expenditure.

Moreover, the opposition may leverage its numbers to ensure that recommendations from the Public Accounts Committee are implemented by the relevant executive bodies. Nonetheless, we must not lose sight of the fact that whichever triumphs we achieve in this Parliament are a result of the peculiar results of the previous election and will not extend to the ninth Parliament. Indeed, ongoing challenges to three Constituency results might suggest that the current composition will not even subsist in this Parliament. Essentially, it is of paramount importance that permanent provisions are made to reign in the excessive powers of the executive and promote a truly responsive and representative Parliament.

Author

Sam Kwadwo Owusu-Ansah | Research Analyst, Transnational Policy | s.o@borg.re

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92021 borg. Legal & Policy Research

Seed Capital and Angel Investment: What Startups should know when ‘Starting Up’

2021-02-23T10:00:47+00:00

Start-Ups | Business

In 2019, the failure rate of startups was around 90%. A strong recurring reason for this failure is a lack of capital at the initial stages to develop the business, and a lack of capital to enhance its continuous growth. We look at what seed capital and angel investments mean for startups.

Why do Startups need Seed Capital?

Startups usually require a large amount of capital to get itself off the ground and running. Getting capital is a critical stage for every new business, as capital is required to develop the business plan and set it in motion. Statistics show that for 33% of small business owners, the greatest challenge is lack of capital.

29% of small businesses fail because they run out of funds. Thus, once adequate capital is gotten for each stage of growing and running a startup, such a startup has a better chance of succeeding than startups with little or no capital.

Capital can be gotten from a variety of sources, such as venture capitalists, banks, lending houses, etc. However, before these sources can provide a large amount of capital required, startup owners must properly develop the business or product idea and successfully sell same to potential investors. Seed capital is needed to develop such a business idea which will, in turn, be presented to investors who will provide bigger capital to run the business.

Preliminary activities such as market research, product research and development (R & D) are critical aspects of developing a business plan. A major reason for the failure of startups is fundamental shortcomings in their business planning, and a poorly drawn-up business plan may be a result of insufficient capital which is needed to carry out thorough research.

Statistics show that 30% of startups fail from a lack of capital to grow the business for marketing, personnel acquisition, design, and development of the technology and business direction.

Its 2019 report also showed Kenya and Nigeria as the premier investment destinations on the continent for that year, attracting US$149 million and US$122 million in funding respectively.

Investors such as venture capitalists and banks usually require a well-drawn up business plan before they decide to invest in any business. It is the business plan that shows them whether such a startup has the potential to succeed and bring the envisioned return on investment. Investing in startups is considered high-risk and this is because such startup has no track record of success or any portfolio to prove to investors that their money is being invested in the right business.

A lack of seed capital may mean that a startup owner will not be able to properly develop his business idea. And this will mean that such a startup will not be able to attract venture capitalists and/or banks that have large amounts of money to invest. Seed capital may come from the owner’s personal assets, or from his family and friends, and such capital is a relatively modest sum. It has been shown that 77% of small businesses rely on personal savings for their initial funds. Family members and friends may or may not get anything in return for what they invest in the business, depending on what they agree on with the business owner. Another source of getting seed capital are angel investors.

Angel investors are persons or groups who provide initial or continuous capital for startups in return for ownership equity in the company or convertible debt. They could be family members and friends of the business owner. They could also be unknown persons to the entrepreneur, who are looking to invest and get a stake in the business or just to mentor the startup.

Apart from monetary investment, angel investors could also provide technical know-how, mentorship, financial planning or legal advice to a startup. In 2018, there was an estimated 345, 000 business angel investors in Europe. The name ‘angel’ is given to this group of investors because they are the ones who invest in a new business when no other group of investor is willing to do so.

Angel Investment (in Africa)

In recent years, there has been a rise in angel investment and other early-stage investments in Africa. According to a report from Disrupt Africa, funding for African startups jumped by 51% to $195 million in 2017, while the number of funded startups also increased by 8.9%. Its 2019 report also showed Kenya and Nigeria as the premier investment destinations on the continent for that year, attracting US$149 million and US$122 million in funding respectively. Another report by Weetracker in 2018 also showed that USD 725.6 million was invested across 458 deals in Africa, which was over 127% increase in the number of deals in 2017.

Furthermore, Future Africa, an African-based angel investment platform recently released a report showing that it had invested $1 million in 9 African startups in the third quarter of 2020. Perhaps, the reason for the exponential growth of early-stage investment in Africa is due to the untapped human and natural resources on the continent. It is estimated that the continent’s labour force is expected to reach 1.1 billion by 2040 and that she has 60% of the world’s unutilized but arable cropland, as well as the world’s largest reserves of critical minerals.

Or perhaps, it could be because of the vast opportunities available for developing emerging sectors such as fintech. Or possibly it is due to the fact that African companies grow faster and are more profitable than their global peers. Whatever the reason, one thing is certain, and it is the fact that the coming years will see greater investment infiltrate the startup space in Africa.

How to Attract Angel Investment

Since angel investment is often the primary and one of the easiest sources of funding for many startups, and since they fund more startups than all other venture sources combined (over $25 billion annually), it is important for a startup to know how to attract them.

The first is to get the basics right, such as having a viable business product or idea. To attract angel investment, a startup owner must ensure that the business idea he wants to pitch is viable and has growth opportunities. This is a fundamental factor considered by angel investors or other early-stage investors. One way to check for this is to consider whether the market has a need for such a business product or service. Statistics show that the most common reason small businesses fail is that the market does not need their product or service. No angel investor will invest in a company whose business idea is not viable enough or even needed in the market, angel investors look for companies with growth and export potential.

Another basic to get right is assembling a strong team for the business. Angel investors want to see that the team that is to run the business is functional and competent enough to drive for profit. It has been shown that 23% of businesses fail because they don’t assemble a good enough team. Angel investors look to avoid such businesses. And although many business owners choose to run solo, that is another shown cause of small business failure.

The next step to take in attracting angel investment is to look for angel investors that are specific to the industry of the business in question. There are angel investors who focus on a particular sector of industry and are usually experts in those areas. Such investors look not only to invest money but also to provide mentorship and guidance to startups. It is easier to get angel investment this way.

Another factor that startup owners should consider is identifying angel investors that are geographically close to them. The reason being that the peculiar nature of angel investment is that the investors look to add value to the startup, either by serving as an advisory team or by having a stake in the decision-making process. It is thus important to know beforehand the value proposition being offered by the particular angel investor. “An angel wants to be nearby so they can drive over to talk to the principals,” says Jim Orgill, managing director of advanced technologies for the Business Development Bank of Canada.

Having a viable exit strategy is also a key factor that some angel investors consider before investing in a startup. It is therefore important for a startup owner to draw up an exit plan which will include how the investor can get back their money if the business fails. Some common exit strategies investors lookout for include having rights to sell the shares or gaining money from mergers.

Finally, joining business and trade organisations, as well as other community organisations, is an effective way to network and meet people who may provide insights into getting financing or other assistance for a business. It is also a way of getting one’s startup in the face of as many people as possible. Angel investors may also be found on online sites that connect entrepreneurs with angel investors and other early-stage investors.

Conclusion

There are 305 million total startups annually and 100 million startups are opening each year. However, 21.5% of startups fail in the first year with the percentage increasing in the second, fifth and tenth years. In 2019, the failure rate of startups was around 90%. A strong recurring reason for this failure is a lack of capital at the initial stages to develop the business, and a lack of capital to enhance its continuous growth.

Obtaining seed capital to develop the business idea and set it in motion is a critical stage for every startup. Attracting bigger amounts of capital from sources such as venture capitalists, banks or lending houses will only be possible if the startup owner is able to properly develop his business plan and tighten up the strings in the area of product development, market research, pricing, building a strong team, and having success with the product or service in its initial stages of operation.

Capital gotten from the owner’s personal assets or from his friends and family may not be sufficient in some instances to develop the business idea and set it in motion. Therefore, angel investments have become a trusted source of obtaining seed capital for the initial stages of the business. In addition to providing money, angel investors are also available to provide guidance and mentorship to a startup to help it avoid some common mistakes made in running a new business.

Although the number of startups that fail each year is on the high side, having the right information to run a business and obtaining a strong source of funding will help startups ‘start-up’ better in the year ahead.

Author

Emaediong Lawrence | Research Assistant, Start-Ups, Business, Jobs | e.l@borg.re

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92021 borg. Legal & Policy Research

Cryptocurrencies: CBN’S Proscription on its Operations in Nigeria

2021-02-09T07:56:49+00:00

The CBN through a circular issued on 5 February 2021 instructed regulated institutions dealing in or facilitating payments for cryptocurrencies exchange to close all accounts used in trading cryptocurrencies. We look at what the circular means for Nigeria's crypto-community, what we can learn from India and why the circular is flawed.

Issue Brief

In recent years, cryptocurrencies have gained prominence against the backdrop of Nigeria’s weak local currency. Virtual currencies gained prominence when Nigeria’s Securities and Exchange Commission in 2020 issued regulatory guidelines for crypto assets that qualified as investments for securities transactions.

Nigeria has the world’s second-largest bitcoin by trading volume according to Crypto Market Place Paxful reports in 2020. In 2020, the Global Crypto Adoption Index ranked Nigeria eighth out of 154 countries for cryptocurrency adoption. The expansive growth of cryptocurrencies has prompted more national and regional authorities to grapple with their regulation.

The CBN through a circular reference number BSD/DIR/GEN/LAB/14/001 issued on 5 February 2021 instructed that regulated institutions dealing in cryptocurrencies or facilitating payments for cryptocurrencies exchange and all Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NFBIs) and Other Financial Institutions (OFIs) are to close all accounts used in trading cryptocurrencies and other related transactions. The CBN further added that breaches of the directive would attract severe regulatory sanctions. Prior to this circular, the CBN had through a press release in 2018 warned investors and dealers about the risks involved in trading in cryptocurrencies.

Interestingly, the CBN did not highlight any new risk in this circular rather it hinged on previously highlighted risks in its circular issued in 2017 asseverating that virtual currencies were largely untraceable and anonymous heightening the risk of financial fraud, money laundering and terrorism financing.

However, there are lots of speculations and educated guesses on the rationale behind this policy noteworthy is the End SARS protest in October 2020 where the organizers accepted bitcoins for funding after the government allegedly blocked local payment platforms for collecting donations. Also, a significant part of cryptocurrencies are remittances which is a source of concern to the CBN seeking to control its exchange rate.

This CBN’s proscription is reminiscent of the policy issued by the Reserve Bank of India (RBI) via its circular issued in 2018 putting a lid on the use of cryptocurrencies which was challenged by the Internet and Mobile Association of India - in the case of Internet and Mobile Association of India v Reserve Bank of India on two alternative grounds. Firstly, RBI doesn’t within its powers encompass the regulation of virtual currencies as it is considered a tradable commodity and not legal tender.

Secondly, assuming virtual currencies fell within the RBI’s regulatory purview, the circular had disproportionately infringed the rights of the Internet and Mobile Association of India. Regarding the first ground, the court held that where a commodity isn’t currency but functioned as legal tender, under certain circumstances the RBI had the power to handle it in pursuance of its role as the apex regulator of the country’s financial system.

On the second ground, the court held that RBI could have achieved its stated objectives through alternative regulatory methods and thus ruled against the RBI holding that the guidelines issued by the RBI prohibiting banks and other financial institutions from trading in virtual currencies are illegal and unenforceable.

Interestingly, while the case against RBI was still in court the reports of Indian’s inter-ministerial committee tasked with proposing cryptocurrency measures were presented to the parliament containing a draft “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019.” The draft bill seeks to create a facilitative framework for the creation of official digital currency by the Reserve Bank of India and prohibits all private cryptocurrencies in India with exceptions. However, according to India’s ministry of finance, the draft bill is to be examined collaboratively with relevant departments and regulatory authorities before it is either rejected or passed into law.

Using India as a case study, while the social media uproar is ongoing, the Nigerian crypto-community could challenge this policy before the Nigerian judiciary, based on the grounds highlighted in the RBI's case with reference to relevant sections of the constitution, cases and principles.

What Is The Implication of This Policy?

The emergence of cryptocurrencies as a radical innovation and financial solution through internet-based technology is indubitably a tool for economic development. Hence, this recent development in Nigeria’s cryptocurrency space is illaudable and creates rippling effects on Nigeria’s economy. Simultaneously, Nigeria’s foreign capital inflow is at its lowest declining from $23.9billion in 2019 to $9.68 billion in 2020 according to the data released by the National Bureau of Statistics and currently running at a debt of over ₦31 trillion.

This policy further reiterates CBN’s position that cryptocurrency is not a legal tender in Nigeria albeit no effect on its financial institution since cryptocurrency had never been legally integrated into Nigeria’s financial institutions and it would incapacitate cryptocurrency exchangers like Patricia, Binance, Luno amongst others from facilitating payments for cryptocurrency exchanges.

What is the Way Forward?

With the future of global electronic transactions involving digital currencies, efforts have been made by the CBN to reduce the number of bank-related fraud cases through requesting all accounts to be linked with a Bank Verification Number. Hence, rather than a ban, the CBN should issue guidelines and adopt strategies that encourage innovation while protecting the interests of consumers and citizens such as obligating cryptocurrency exchanges to conduct comprehensive KYC procedures on their customers and holders of cryptocurrencies amongst others.

However, this requires communication and collaboration between all stakeholders particularly with regards to enacting regulations. Furthermore, the contrasting opinion on cryptocurrencies held by SEC and CBN reflects the inherent dilemma that cryptocurrencies represent as a tradeable asset therefore both SEC and CBN should harmonize their stance on cryptocurrencies in Nigeria.

This issue brief was provided by

Oluwayemisi Adeluoye | Research Analyst, Banking and Finance | y.a@borg.re

Disclaimer

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and are protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92020 borg. Legal & Policy Research

A Bill For Interest-Free Student Loans

2021-02-02T10:09:18+00:00

#ThereIsABillinTheHouse that seeks to ensure easy access to tertiary education by providing interest-free loans to Nigerian students once certain conditions have been met. We look at the provisions in the Bill and its feasibility.

Issue-Brief

The Student Loan (Access to Higher Education) Bill (the "Bill") is currently before the National Assembly. It seeks to provide easy access to tertiary education for Nigeria by providing interest-free loans from the Nigerian Education Bank established pursuant to the Act.

Broadly, student loans are facilities designed to help students across tertiary institutions pay for their tuition, associated fees and living expenses. The financial cost of tertiary institutions varies across jurisdictions; nonetheless, it is generally more expensive than the primary and secondary levels of education.

Hence, this Bill is laudable, particularly in light of the widening poverty gap in Nigeria with more than 100 million Nigerians living below the poverty line. Nevertheless, the provisions of the Bill when juxtaposed with the already heavily subsidised cost of tertiary institutions in Nigeria raises a question as to the necessity and appropriateness of the law in our jurisdiction. In this issue brief, we have undertaken a review of the Bill, highlighted its benefits and other issues arising.

The Student Loan Bill

The Bill is applicable to all matters relating to the application and grant of student loan to persons seeking admission into higher institutions in Nigeria through the Nigerian Educational Bank. The Bill seeks to repeal the Nigerian Education Bank Act(Cap 104 LFN 2004). The Bill provides that access to the loans which are to be granted for the sole purpose of tuition fee payment subject to certain requirements and conditions as provided for under the Bill is to be free from any form of discrimination.

Additionally, the Bill seeks to establish Nigerian Education Bank (the "Bank") which is to be a body corporate with perpetual succession and a common seal with powers to sue and be sued. The functions of the Bank include, among other things, the supervision, coordination, administration and monitoring the management of student loans in Nigeria.

The Bank is to have a Governing Board charged with the responsibility of discharging its functions. Appointment of the chairman and members of the Governing Board is to be done by the President subject to the National Assembly's confirmation. This is especially relevant as the previous National Education Bank was wounded up notably due to the absence of an active governing board.

The Bill further establishes a Student's Loan Fund which consists of all interests arising from deposits in the Bank, education bonds, education endowment fund schemes, 1% of all taxes, levies and duties accruing to the Federal government from the Federal Inland Revenue Service, Nigerian Immigration Service and the Nigerian Customs Service, 1% of all profits accruing to the government of the Federation arising from oil and other minerals, all sums accruing to the fund by way of donations, gifts, grant, endowment or otherwise, interest and revenue accruing from savings and investments made by the Bank as well as other revenue accruing to the Bank from any other source.

The Bill stipulates conditions for students' eligibility to apply for the loan, including an income of less than N500, 000 per annum for such families. In addition, the Bill provides for categories of people disqualified from accessing loans, in a bid to guarantee the repayment of such loans. Loan applications are to be submitted through the student affairs office of each institution accompanied by a cover letter signed by the head of the institution and the student affairs officer and addressed to the chair of the board of the Bank.

The Bill states that repayment shall commence two years after the completion of the National Youth Service Corps programme and is to be a direct deduction of 10% of the beneficiaries' salary at source by the employer and credited to the students' loan account to be prescribed by the Bank.

Where the beneficiary is self-employed, the same is required to remit 10% of his total profit monthly to the student loan account. Self-employed beneficiaries are required to submit, within 60 days of assuming the status, all information relating to the business to the Bank. Failure to do so attracts an imprisonment term of two years or a fine of N500,000 (Five Hundred Thousand Naira) or both if convicted.

Feasibility of the Bill

The Bill appears to be a welcome development in light of the literacy rate in Nigeria, which was put 62.02% as of 2018 and the poverty ratio in Nigeria. However, its sustainability and the immediate need remain a grey area. The primary issue is unemployment/underemployment in Nigeria. As at the second quarter of 2020, Nigeria's unemployment rate stood at 27.1% indicating that about 21,764,614 (21.7 million) Nigerians remain unemployed. Nigeria's unemployment and underemployment rate (28.6%) is a combined 55.7%. This is worsened by the lack of job security in Nigeria. Accordingly, loan repayments may prove difficult, if not impossible, where the person is unable to secure a job.

Asides this, the quality of education raises fundamental questions as to the suitability of the individual of a post-graduate job. The Nigerian educational system is plagued with infrastructure deficit, and lack of proper facilities required in higher institutions amongst others. These problems have been numerously associated with the heavily subsidized tertiary education system in place.

It is, therefore, important to examine the feasibility of student loans in Nigeria. Recommendations have been made to increasing the cost of tuitions to address the infrastructure deficit, as well as the overall quality of education. Where this is implemented, the loan would thus become relevant, and not a mere statutory creation enabling fund siphoning.

Additionally, the brain drain, which is a major problem in Nigeria, ultimately raises further questions as to the enforceability of loan repayment, which has been in the past catastrophic to similar organizations.

This is part of our series on #ThereIsABillinTheHouse.

This issue brief was provided by

Rachel Ogidan | Research Analyst, Governance and Political Institutions | r.o@borg.re

Our issue-briefs provides a platform to provide commentaries on knowledge surrounding a current relevant local or transnational discussion.

Review of Amended Business Legislations in Nigeria in 2020

2021-01-13T19:44:30+00:00

Legal | Policy Insight

The World Bank Doing Business 2020 Index ranked Nigeria 131 out of 190 countries, moving her 15 places higher from her 146th position in 2019. In a bid to modernize business practices and expedite the ease of doing business in Nigeria, there were amendments to some key business legislation in Nigeria in 2020.

The report concluded that the country is one of the most improved economies in the world for running a business. While there seems to be an improvement, Nigeria is still far off in respect of removing hurdles that limit business growth.

In order to continue this steady improvement, the following business legislations were amended in 2020:

The Companies and Allied Matters Act, which is Nigeria’s leading business legislation, was amended on 7th August 2020 since its enactment in 1990. It is a legislation that governs the incorporation and operation of companies and other corporate organizations in Nigeria. It was amended to make business registration seamless and improve corporate governance within the Nigerian company regulation regime amongst other things.

The Finance Act - a consolidation of several tax statues, was amended in a bid to increase the revenue of the Federal Government and to curb avenues by which tax has been evaded and or avoided over the years. The Act was further amended in 2020 to introduce more sweeping reforms to the tax statues contained in the Act. The 2020 Act was signed into law on 31st December 2020 which commenced in January 2021.

The Banks and Other Financial Institutions Act is an Act that regulates banking and other financial institutions in Nigeria. It provides for the establishment and duties of banks, operation of other financial institutions, books of account and other miscellaneous matters.

Download the full Insight here

Authors

Bolaji Ogalu | Lead Research Analyst, Governance & Political Institutions | b.o@borg.re

Emaediong Lawrence | Research Assistant, Business | Start-Ups | Jobs | e.l@borg.re

Disclaimer

The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of borg.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy.

\u00a92021 borg. Legal & Policy Research

Factsheet on The African Continental Free Trade Area (AfCFTA)

2020-12-31T10:59:47+00:00

Trade and Investment

The AfCFTA is here. Follow the facts from creation to date.

Introduction

The creation of an African Continental Free Trade Area (AfCFTA) was proposed at the 18th Ordinary session of the Assembly of the African Union in Addis Ababa, Ethiopia in January 2012. The AfCFTA is one of the flagship projects of the first 10-year implementation plan of the African Union’s Agenda 2063 – which is Africa’s blueprint and master plan for transforming the continent into the global powerhouse of the future.

The AfCFTA is a framework Agreement covering trade in goods and services including Protocols on Trade in Goods, Trade in Services, Investment, Intellectual Property Rights, Competition Policy, and Dispute Settlement; and their associated Annexes and Appendices.

The AfCFTA agreement establishes a single continental market for goods and services and seeks to increase intra-African trade by reducing and eventually eliminating custom duties and non-tariff barriers. The agreement seeks to harmonize trading rules at the regional and continental level. In terms of numbers of participating countries, the AfCFTA will be the world’s largest free trade area since the formation of the World Trade Organization in 1995.

AfCFTA Negotiations

At the African Union Summit in Johannesburg, South Africa, in 2015, the AfCFTA negotiations were launched. The first meeting of the AfCFTA negotiation forum held in February 2016. There have been over 18 meetings of the AfCFTA Negotiation forum.
Phase 1 of the negotiations (scheduled to have been concluded in March 2018) covers trade in goods, services, trade facilitation and dispute settlement. However, there are aspects that still remain outstanding. The Schedules of Tariff Concessions, the Rules of Origin, and the Schedules of Specific Commitments on Trade in Services are yet to be finalized for all countries.

Phase 2 negotiations cover areas of investment, Intellectual Property Rights and Competition policy. This phase is already underway though the Covid-19 pandemic slowed down the negotiations. December 2020 has been slated for the conclusion of phase 2 negotiations.

Phase 3 negotiations cover digital trade and e-commerce. The Secretary-General of AfCFTA secretariat has announced that the negotiations would be fast-tracked to begin early 2021 as the Covid-19 pandemic has increased the need for governance in digital trade and e-commerce.

AfCFTA Treaty Signatories

At the Extraordinary Summit of African Union Heads of State and Government held on the 21st March 2018 at Kigali, Rwanda, the Agreement establishing the AfCFTA was presented for signature, along with the Kigali Declaration (for the launch of the African Continental Free Trade Area) and the Protocol to the Treaty Establishing the African Economic Community relating to the Free Movement of Persons, Right to Residence and Right to Establishment. 44 countries signed the consolidated text of the AfCFTA Agreement, with Nigeria’s absence standing out. 47 countries signed the Kigali Declaration and 30 countries signed the Protocol on Free Movement.

54 countries out of the 55 African Union member states have signed the Agreement. Eritrea is the only state yet to sign the Agreement. The country’s stance is that the government of Eritrea advocates regional integration over continental aspirations.

Entry Into Force

On the 30th of May 2019, the AfCFTA Agreement entered into force for the 24 countries that had deposited their instruments of ratification. This date marked 30 days after which the twenty-second (22nd) instrument of ratification has been deposited (as provided for in Article 23 of the AfCFTA Agreement). The designated depositary is the Chair of the African Union Commission as stipulated in Article 24 of the AfCFTA Agreement.

The twenty-second (22nd) country threshold in conformity with the legal provision was reached on 29 April 2019 when Sierra Leone and the Saharawi Republic deposited their instruments of ratification with the Chair of the African Union Commission.

State Parties

As at December 5, 2020, which was the deadline for all signatories to ratify the Agreement; 36 countries have complied with the domestic requirements for the ratification of the AfCFTA Agreement to become State Parties. 34 countries have deposited their instruments of ratification with the depositary (Chair of the African Union Commission). 41 countries/customs unions have submitted their tariff offers, including the East African Community (EAC) and the Economic Community of West African States (ECOWAS).

Launch of The Operational Phase of The AfCFTA

The operational phase of the AfCFTA was launched at the 12th Extraordinary Session of the Assembly of the African Union in Niamey, Niger on 7 July 2019. The AfCFTA would be governed by five (5) operational instruments – the Rules of Origin, the online negotiating forum, the monitoring and elimination of non-tariff barriers, a digital payments system and the African Trade Observatory. At the Extraordinary Summit, it was also decided that the Republic of Ghana would host the AfCFTA Secretariat.

Also, at the Summit, the 7th of July each year has been designated as “the Africa Integration day,” without it being a holiday to commemorate the operation of the AfCFTA Agreement and to popularise economic integration across the Continent as a lever of inclusive sustainable development.

Trading under the AfCFTA was originally supposed to begin on 1 July 2020 but has now been put off until 1 January 2021.

THE AfCFTA Secretariat

The AfCFTA Secretariat is part of the institutional framework for the implementation, administration, facilitation, monitoring and evaluation of the AfCFTA Agreement. Article 13 of the AfCFTA Agreement provides for the establishment of a Secretariat by the Assembly of Heads of State and Government of the African Union.

At the 33rd Ordinary Session of the African Union (AU) Assembly of Heads of State and Government, held in Addis Ababa, Ethiopia, from the 9th – 10th February 2020, Mr. Wamkele Mene, who is from South Africa, was elected as the first Secretary General of the AfCFTA Secretariat, for a four-year mandate.

Mr. Wamkele Mene was sworn-in on 19 March 2020 at the African Union Headquarters in Addis Ababa, Ethiopia. This marked the AfCFTA Secretariat being operational, replacing the African Union Commission, which served as the interim Secretariat. The Secretary General is expected to provide leadership and technical support to the AfCFTA Secretariat and to manage the day-to-day activities of the AfCFTA Secretariat; as well as to ensure the implementation of the AfCFTA Agreement and strategic collaboration; stakeholders' engagement; and resources mobilization for the implementation of the AfCFTA Agreement.

The AfCFTA Secretariat Building was officially commissioned and handed over by the African Union to Ghana on Monday, 17th August 2020. The AfCFTA Secretariat is situated in Accra.

The AfCFTA and The European Union Ongoing Support

The European Union (EU) and its Member States are the African Union’s main partners in the AfCFTA project and have been supporting the AfCFTA process from the very beginning. The European Union is Africa’s largest trading partner, making up 30.7% of Africa’s total trade in 2019. The EU was also Africa’s largest source of Foreign Direct Investment (FDI) in 2017 - EUR 221 billion of FDI stocks. The EU and its Member States are the largest providers of Official Development Assistance (ODA): 58% of total ODA to Africa amounting to EUR 24.9 billion in 2018.

Through its Pan-African Programme, the EU has earmarked a total of EUR 72.5 Million to support the AfCFTA in the period 2014-2020. Additional support comes from the wider EU Aid for Trade for Africa and through the EU External Investment Plan for Africa and the Neighbourhood. The EU support to the AfCFTA can be catergorised into support to the AfCFTA negotiation-ratification process and architecture and support to the implementation of the AfCFTA.

The EU’s support to the Negotiation process and Architecture so far amounts to EUR 21.1 Million while the support to the implementation of the AfCFTA amounts to EUR 16 Million.

Benefits of The AFCFTA to The African Continent

The AfCFTA will help bring together a market of more than 1.2 billion people, with a combined Gross Domestic Product (GDP) of more than US$3.4 trillion. Estimates from the Economic Commission for Africa (UNECA) suggest that the AfCFTA has the potential to boost intra-African trade by 52.3 percent by 2022 by eliminating import duties, and to double this trade if non-tariff barriers are also reduced (this offers numerous benefits to the Small and Medium-sized Enterprises (SMEs). It is also estimated that the economy of Africa would be worth US$29 trillion by 2050.

The African Continental Free Trade Area (AfCFTA) can play an important role in helping African countries diversify their productive capacities and integrate into regional and global value chains. The AfCFTA can also support Africa’s COVID-19 recovery, and increase its economic resilience to future shocks. The AfCFTA would help usher in the kinds of deep reforms necessary to enhance long-term growth in African countries.

The African Continental Free Trade Area (AfCFTA) presents a major opportunity for African countries to bring 30 million people out of extreme poverty and to raise the incomes of 68 million others who live on less than $5.50 per day. The AfCFTA would help boost Africa’s income by $450 billion by 2035 (a gain of 7 percent) while adding $76 billion to the income of the rest of the world. Africa’s export would also increase by $560 billion, mostly in the aspect of manufacturing. The AfCFTA would also help boost the wages for both skilled and unskilled workers—10.3 percent for unskilled workers, and 9.8 percent for skilled workers and spur larger wage gains for women (10.5 percent) than for men (9.9 percent).

The AfCFTA could further enable African states to transition towards a collective bargaining bloc, negotiating as one market and strengthening Africa’s common voice in global trade deals.

Benefits of The AfCFTA to Nigeria

The AfCFTA would afford Nigeria’s exporters of goods and services, an expanded market thereby spurring economic growth and boosting job creation. This expanded market allows manufacturers to increase capacity and expand into other African countries. There would no longer be barriers against Nigeria’s products.

The AfCFTA safeguards the Nigerian economy from dumping and other unfair trade practices and ensures trade remedies. The AfCFTA also provides for a Dispute Settlement Mechanism for resolving unfair and discriminatory treatment directed against Nigerian natural and corporate business persons in other African countries.

The AfCFTA provides a platform for the integration of Small and Medium Enterprises (SMEs) into the regional and continental economy. It provides an expanded platform for Nigerian manufacturers and service providers to connect to regional and continental value chains. The AfCFTA would also help accelerate women’s empowerment in every area.

For Nigeria, the AfCFTA can help expand Nigeria’s position as the largest economy on the continent and help consolidate Nigeria’s leadership role in Africa.

Authors

Sarah Akpofure | Research Analyst, Trade & Investment | k.o@borg.re

Ayotunde Abiodun | Research Assistant, Trade & Investment | a.a@borg.re

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92020 borg. Legal & Policy Research

Oil And Gas Regulation Under The Petroleum Industry Bill 2020

2020-12-23T11:36:10+00:00

This issue-brief examines the novel provisions on oil and gas governance and regulation in Nigeria under the Petroleum Industry Bill.

Issue Brief

During the first initiation of a Petroleum Industry Bill in 2008, talks flew round the country about the Bill’s potentials to change the trajectory of the oil and gas industry and the state of the country’s economy. Following several sessions of legislative debates, recommendations from committees, and input from the industry’s stakeholders, the bill was still not passed. For several years, amendments and novel provisions have been introduced to the numerous versions of the bill, with no significant improvement.

Amid a situation that seems like a stalemate, the oil and gas industry continues to be governed by obsolete laws, deeply-rooted corruption, and undue bureaucracy. These factors have continually functioned as clogs in the wheel of the development of Nigeria’s petroleum industry. With the Petroleum Industry Bill of 2020, however, the narrative might be set to change.

With the bill’s new provisions, it could potentially chart a new course for oil and gas governance in Nigeria, especially within the context of creating an all-encompassing legal framework to govern the operations in all sectors of the industry, creating a conducive environment for investment, and fostering an industry that aligns with international best practices.

Checks on The Powers of The Minister of Petroleum

For a long time, the oil and gas operations have been largely regulated and governed based on the discretion of the Minister of Petroleum. From granting the Minister’s power to “impose” special terms on licenses and leases, to giving room for the suspension of petroleum operations based on the Minister’s “opinion”, the current oil and gas regime paints a disturbingly dictative system where the Minister has a wide range of discretionary powers with little or no checks in place. The PIB solves this problem.

Like the Petroleum Act 1969(as amended) , PIB states that the Minister may suspend operations in any area where he feels that there has been a contravention of any of the provisions of the Act (currently still a bill), or until arrangements to prevent danger have been made to his satisfaction.

However, the primary difference is that under the PIB, the Minister can only exercise this power upon the recommendation of the Nigerian Upstream Regulatory Commission or the Nigerian Midstream and Downstream Petroleum Regulatory Authority.

Similarly, the current legal provision on the delegation of the Minister’s powers, states that the Minister may delegate his powers, excluding the power to make regulations, to “another person”. The danger of such a blanket phrase, which does not have an interpretation in the Act, is that the Minister can indeed, delegate his powers to any other individual asides himself, whether from within or outside the Ministry. The PIB, on the other hand, restricts the options for the delegation of the Minister’s powers to the Chief Executives of the Nigerian Upstream Regulatory Commission and the Nigerian

Midstream and Downstream Petroleum Regulatory Authority

However, while these provisions are commendable, they still unduly subject a number of operations to the minister’s discretion. For example, whilst the PIB mandates that a recommendation be made to the Minister before he can suspend operations in an area, the same provision still states that the minister may suspend operations until arrangements to prevent danger has been made to his “satisfaction”. Satisfaction is a deeply subjective concept, and should not be made as a legal benchmark. Instead, an objective expression like “until reasonable arrangements have been made to prevent danger to life and property”, would be much better. It would not only create uniformity but also serve as an investment incentive, as it would assure stakeholders that the industry’s operations are largely separated from the discretion of a single public official.

The Nigerian Upstream Regulatory Commission (NURC)

The Nigerian Upstream Regulatory Commission is established under the PIB as the sole government agency in charge of the regulation, governance and administration of the upstream sector of the oil and gas industry. This Commission, which is essentially a replacement of the Department of Petroleum Resources(formerly the Petroleum Inspectorate), will oversee upstream operations including gas flaring, natural gas reinjection and petroleum exploration operations, amongst other operations.

The Commission’s functions are divided into technical regulatory functions and commercial regulatory functions. The former includes administering and enforcing laws relating to upstream petroleum operations and maintaining a Nigerian Petroleum Industry Data Bank comprising materials and data submitted to the Commission. This data bank is not new. It was established in January 2020, through a regulation, as an arm of the Department of Petroleum Resources. Should the PIB be passed, it essentially means that the National Data Repository will be operated by the NURC.

The commercial regulatory functions of the agency include approving commercial aspects of field development plans, supervising cost control in upstream operation and implementing cutbacks on crude or condensate production as ordered by the Minister.

However, in what seems like a renewed attempt to develop oil and gas reserves in Nigeria, the Bill includes the functions of the NURC for frontier basins in the country. Frontier basins are basins with a significant volume of undiscovered resources and where exploration activities have not been carried out. Under the bill, the NURC would function to develop exploration strategies for the exploration of unassigned basins and increase information about the petroleum resources base in the frontier basins. This is a commendable move, considering the government’s new target to increase the country’s oil and condensate reserves to 40 billion barrels by 2025.

The Bill also creates a rather interesting requirement for government agencies to notify the Commission before taking actions or issuing regulations,

orders or directives that may directly impact upstream operations. This may mean that agencies like the National Oil Spill Detection and Response Agency(NOSDRA) may have to notify the Commission before imposing heavy fines which could significantly increase production costs and possibly hamper production.

The Nigerian Midstream And Downstream Petroleum Regulatory Authority (NMDPRA)

The PIB establishes the Nigerian Midstream and Downstream Regulatory Authority as the government agency in charge of both the midstream and downstream operations in the petroleum industry. The Authority’s functions include determining the tariff methodology for processing natural gas transportation and storage, determining the domestic supply obligations, and developing open-access rules for bulk storage facilities and transportation facilities, amongst other functions.

The Authority’s regulatory powers equally span across natural gas trading and export, dispute resolution and customer protection, competition, and the processing, storage, and supply of petroleum products. Quite interestingly, the Bill also includes special powers for the NMDPRA. These special powers are basically investigative powers with which the Authority will be able to crackdown on companies and persons involved in illegal midstream and downstream operations like oil bunkering. These powers are to be exercised by the Special Investigation Unit of the Authority.

Inclusive Governance

In an attempt to boost stability and fully involve the industry’s stakeholders in the governance process, the Bill mandates both the Nigerian Upstream Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority to consult with stakeholders (licensees, lessees and permit holders) before finalizing or amending any regulation. To kick-start the consultation, the Bill requires that a notice be published on at least, two national newspapers as well as the agencies’ websites, detailing the venue, time, subject matter, and other important pieces of information.

However, the Bill also creates an exception to this provision, which stipulates that in cases of national interest, both agencies will be able to make laws without the required consultation, subject to the fact that such regulations would only be valid for a maximum of one year, unless the agency carries out the consultation process.

This provision is much needed, as one of the major factors hindering investment in Nigeria’s oil and gas industry is the inconstant regulatory regime. With the adoption of this provision, investors would not caught off-guard by regulatory changes. This would, in turn, facilitate considerable stability in the petroleum industry.

Conclusion

With the dwindling demand for oil and gas and the imminent global transition to renewable energy, the need to fully harness Nigeria’s oil and gas industry is more urgent than ever. However, with the current regulatory regime which is being operated, there is a high probability that Nigeria’s oil and gas potentials will not be attained. The PIB 2020 presents a fresh opportunity for Nigeria to restructure its petroleum industry, create an investor-friendly environment, and effectively profitize its oil and gas reserves.

This is part of our series on #ThereIsABillinTheHouse.

This issue brief was provided by

Oyin Komolafe | Research Assistant, Energy | k.o@borg.re

Our issue-briefs provides a platform to provide commentaries on knowledge surrounding a current relevant local or transnational discussion.

Disclaimer

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and are protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92020 borg. Legal & Policy Research

South Sudan's Protracted Civil War

2020-12-10T10:11:42+00:00

There seems to be an unending conflict in South Sudan which has claimed and displaced millions of lives. We examine the protracted civil war in South Sudan and consider it in light of recent peace efforts in the country.

When South Sudan seceded in 2011, the country sought to put the 40-year conflict that bedevilled their union with Sudan behind them. The conflict which claimed about 2.5 million lives and displaced over 4.5 million others ended with the prime expression of the right to self-determination, independence.

With post-colonial African history as a guide, South Sudan had every opportunity to avoid the fate of several sub-Saharan states and leverage the country’s considerable oil reserves to bring economic, social and especially political development to its citizens. However, having failed to avoid the conflicts that threaten the Horn of Africa, the realities of post-independence is strikingly dissimilar from the expectations of the young nation. Sadly, the nation has been in a state of persistent conflict following their independence.

The humanitarian crisis triggered by the unending conflict has been exacerbated by the Covid-19 pandemic which has slowed down peace efforts, rendering the country vulnerable to floods, food shortages and grim economic fortunes. We examine the protracted civil war in South Sudan and consider it on the back of recent peace efforts in the country.

South Sudan’s Conflict Situation

The Civil War has persisted through various peace and cease-fire agreements and over the past six years, has claimed about 400, 000 lives and caused the displacement of millions. Its root causes are difficult to ascertain as the country itself was birthed in conflict. However, a common narrative frames the civil war as an ethnoreligious one as the key belligerents, President Salva Kiir and his opposition Vice-President Dr Riek Machar are from the two biggest ethnic groups in South Sudan, the Dinka and Nuer respectively.

The history of ethnic violence between the Dinka and the Nuer goes beyond the civil war and the formation of the country. It is therefore not surprising that the civil war has witnessed various assaults targeted at members of the opposing ethnic group with continuous land conflict in the Upper Nile maintaining volatile ethnic tensions. However, this narrative is parsimonious and ignores other causes of the conflict.

Indeed, the allegiance of the armed forces in the country is primarily split between the belligerents hence loyalty to the state is ancillary.

Political differences and a power tussle for resource control is one of such causes. From the struggle for political positions to the seeming marginalisation of certain ethnic groups within the state, leadership in South Sudan has always been volatile. Before independence, the Sudan People’s Liberation Army (SPLA) (now South Sudan People's Defence Forces (SSPDF)) had several internal political issues which led to the defection of Dr Machar in the 1990s and the creation of the Sudan People’s Liberation Army (SPLA-Nasir) splinter faction.

Though Dr. Machar was readmitted during the transition period between 2005 and 2011, this did not dispel the political tension that existed between himself and Dinka members of the SSPDF. Following accusations of the theft of $4 billion in state funds by President Kiir in 2012, Dr Machar and several disgruntled government officials were removed from office by the President. This was the trigger of the conflict which metamorphosed into the current civil war.

Alternatively, the enduring conflict may be attributed to the “military aristocracy” in South Sudan, which has seen the steady transfer of resources from the general public to military authorities. Senior military leaders have participated in nefarious practices to further establish themselves and obtain allegiance from lower-ranking officers, thereby establishing a lower stratum of followers. Indeed, the allegiance of the armed forces in the country is primarily split between the belligerents hence loyalty to the state is ancillary.

The existence of a military aristocracy means there is no social contract, rather it is a system of loyalty built on the cusp of military strength. The loop seems to be beneficial: military resistance will finally be called to the negotiating table to discuss power-sharing agreements disguised as attempts at resolving the conflict. Thence, there has been a series of power-sharing agreements with the Revitalised Agreement on the Resolution of Conflict in the Republic of South Sudan (R-ARCSS) being the most recent.

The R-ARCSS was signed in 2018 after the short-lived Agreement on the Resolution of Conflict in the Republic of South Sudan (ARCSS) of 2015 ended with resumed armed conflict a year after.

The (R-ARCSS) was signed by the government of South Sudan, under the leadership of President Salva Kiir; the Sudan People’s Liberation Movement in Opposition (SPLM-IO), under Riek Machar; and other opposing parties. The agreement has two phases; the Pre-Transitional Phase and the Implementation phase; and provides for a three-year period of a Transnational Government of National Unity (TGoNU) to precede national elections.

The transitional government is meant to have 5 vice-presidents with 35 cabinet ministers; 20 appointed by President Kiir, 9 by Machar, and six appointed by other parties. The agreement covers support infrastructure for a ceasefire in the country, adopts provisions to ensure humanitarian assistance, spells out ways for the management of economic and financial resources and allows for the creation of a permanent constitution for the country. Importantly, the agreement provides for the unification of the armies of the conflicting parties into a unified force.

However, as earlier mentioned, this is not the first agreement aiming to push the warring parties to peace. Hence, it is important to determine whether R-ARCSS can usher in a regime of peace and prevent any further armed conflict in the country.

R-ARCSS: A Glimmer of Hope

The R-ARCSS and the success of TGoNU as yet presents a glimmer of hope to the South Sudanese people. Arguably, the R-ARCSS learns from the failure of the previous agreement by involving a lot of the opposing parties to reach the agreement. Hence, reports suggest that the security situation in the country has significantly improved since the signing of the agreement.

The agreement has been lauded by certain parties, stating that the deal has “moved the country further along the road to sustainable peace”. Movement between cities is now comparatively secure in most of South Sudan, with fewer shootings at night, an improvement in the amount and variety of goods on the streets, the free flow of fighters without prompting infighting, and moves for cultural renewal.

These developments are specifically credited by people to 'handshake moments' between President Kiir and opposition leader Machar. Furthermore, key entities in facilitating the signing of this deal, the Sudanese and the Ugandan Governments appear willing to push for peace. Encouragingly, the United States has not committed any missteps which may sound the death knell to the present transitional government.

The South Sudan government also appear committed to the pursuit of peace with President Kiir conceding his position and reverting the states to 10 from the 32 states he created in 2017 to facilitate the formation of the TGoNU. Thus, while the R-ARCSS has faced considerable challenges in its implementation, it is impossible to deny that the agreement gives hope to the South Sudanese faithful who covet peace and security above all else right now.

R-ARCSS: A Fragile Peace Agreement

Relieving the top-level confrontation, symbolized by the signature "handshake" moment between President Kiir and Dr Machar, does not resolve the whole complexities of conflict at work in South Sudan. Various parties have questioned the viability of the peace agreement ever since its signing, with President Kiir himself remarking that the country has become a field for experiments. The hope presented by the R-ARCSS does not deny the fact that the agreement is fragile.

A principal cause of concern is that the agreement does not involve all the disgruntled parties hence the recent conflict between the National Salvation Front (NAS), the SSPDF and other parties. Furthermore, the task presented by the agreement is a daunting one. The unification of the country’s army with the armed forces of the splinter factions was projected to be and has been a rather difficult exercise.

Similarly, there exist evident differences between the parties concerning the re-estabilshment of state boundaries with Dr. Machar openly rejecting the President’s concession to return the number of states in the country to 10. Hence, while the TGoNU is deemed a success, the formation came almost 7 months late as a result of the inability of the agreeing parties to resolve key provisions of the agreement.

The parties are, essentially, “allocating” states and power to themselves. In simple terms, this is not a government of, for or by the people of South Sudan. This is a government formed to ease the external pressure and preserve a political class' vested interests.

The formation of the TGoNU itself appears unsettling with some political appointment, including the appointment of Dr. Machar’s wife Angelina Teny, deemed heavily biased. Moreover, the agreement allows a great deal of discretion and autonomy to the conflicting parties in its enforcement and application.

This has resulted in the partial, selective and inadequate implementation of the peace agreement. In addition, some of the underlying problems have not been, and may not be, solved by the agreement. Trust issues, economic mismanagement and incompetence, inter-communal conflict and land disputes would persist irrespective of the successful implementation or otherwise of the agreement as it prioritises power-sharing over structural reforms. South Sudan’s political arena is filled with political parties that have their “own” armed forces.

Therefore, the recent defection of prominent individuals from their respective political parties could have significant security implications. Ultimately, R-ARCSS being a power-sharing agreement and the failure to adequately unify the splintered forces establish its fragility. Nothing prevents a disgruntled party from returning to arms where they believe they are not benefiting enough from the “sharing” of the state.

Absence of War or Sustainable Peace

It cannot be denied that the formation of the TGoNU signals the end of the civil war. However, the absence of war is not the beginning of peace. The very foundation of the agreement is disturbing. The parties are, essentially, “allocating” states and power to themselves. In simple terms, this is not a government of, for or by the people of South Sudan. This is a government formed to ease the external pressure and preserve a political class' vested interests.

The military aristocracy remains unharmed, undisturbed and successful. The agreement does not, therefore, address the structural vices of troubled South Sudan. Disputes between national elites have obscured more localized violence in South Sudan. The United Nations Commission on Human Rights in South Sudan noted in a January 2020 study that at the national level, armed conflicts largely turned into regional conflicts at the beginning of December 2018.

Power-sharing continues to be the major focus of the peace transition rather than the need to correct the structural problems that plague the people of South Sudan. The TGoNU must step past platitudes and handshakes to genuinely resolve the possibility of future hostilities and repeated massacres.

The TGoNU must address the root causes of inter-ethnic conflicts, including rivalry for power and wealth. And to prevent committing the errors of the past, the TGoNU must bring an end to the atmosphere of immunity and impunity that benefits those who, during the civil war, directed and monitored attacks on innocent civilian communities. All these must be done while ensuring that the interest of citizens and general development of the state are given primacy as the nation progresses towards positive and sustainable peace.

Need for a Transition to Sustainable Peace

The absence of war cannot be seen as a success especially when it is based on a fragile agreement and the background of the multi-layered conflict. Addressing the humanitarian and economic crisis must be matched by efforts to ensure institutional reform. The path to peace must be shored up by political will and support. The transition to sustainable peace must be beyond unfair economic sanctions and misguided private interests. For far too long, the South Sudanese people have suffered needlessly from the consequences of war and atrocities. The government must return to the social contract and uphold their duty and facilitate the welfare of the people.

Author

Sam Kwadwo Owusu-Ansah | Research Analyst, Transnational Policy | s.o@borg.re

Alao Omeiza | Research Assistant, Transnational Policy | a.j@borg.re

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92020 borg. Legal & Policy Research

The Many-Faced god: Ghana Goes to the Polls

2020-12-07T09:06:38+00:00

As Ghana goes to the polls to elect a President to lead the country for the next four years, We examined the policy positions of both parties and the burning issue taking centre stage in the election.

Issue-Brief | Sam Kwadwo Owusu-Ansah

Polls have opened across a majority of the 33,367 polling stations in Ghana’s 16 regions where 17,027,655 Ghanaians are expected to vote for 275 members of Parliament (save in the Guan District Assembly due to a redistricting issue) and more interestingly, to elect a president to lead the country for the next four years.

Nana Addo Dankwa Akufo-Addo of the New Patriotic Party (NPP) vies to protect his incumbency, a feat which his opponent John Dramani Mahama, the former president and flagbearer for National Democratic Congress (NDC) was unable to achieve in the erstwhile 2016 presidential elections.

Campaigning for this election cycle was subdued by the Covid-19 pandemic with some commentators describing the lead-up to the elections as ‘boring’. The cries of an election being “the most important of a generation” which has featured prominently in election cycles elsewhere during the year are notably missing in the Ghanaian situation. Nonetheless, the scaling down of the pandemic restrictions saw a boost in the campaigns of the two major parties and a semblance of the mammoth rallies of times-past was achieved in the weeks preceding the campaign deadline on Saturday, December 5, 2020.

The issues

The ideological differences between the two parties, like in several other African states, are insignificant. For instance, while the incumbent NPP identifies as centre-right and positions itself as the pro-business party, its flagship campaign policy is the achievement of the Free Senior High School (SHS) campaign promise it made in the previous election, a policy the proclaimed social democrats of the opposition NDC decried as unrealistic and undesirable in that election cycle.

The NDC promises, if given the mandate, to optimise the Free SHS policy and put an end to the double-track system, a contingency measure adopted by the government wherein students and staff of SHS will be divided into two streams to accommodate the influx of students and reduce the strain on school resources.

The opposition further promises to absorb the fees of first-year tertiary students and absorb half of the fees of continuing students. Their manifesto boasts a host of policies to incentivize small businesses, expand the National Health Insurance Policy and to check the proliferation of Small Arms and Light Weapons which have become an increasing concern in Ghanaian society especially in the light of the security situation in the sub-region.

The government on its part promises to continue on its digitalization project and to recoup the impressive gains it made in the economy prior to the pandemic. Their manifesto focuses especially on their handling of the pandemic, which has been largely perceived in a positive light by the public, and the presentation of a post-Covid-19 recovery plan.

Nonetheless, the issue which has taken centre stage in this election is corruption. The Mahama- led NDC administration between 2012 and 2016 was marred in several corruption scandals which adversely impacted public perception against them. Nana Akufo-Addo played on these sentiments to present himself as an anti-corruption crusader in the previous election to secure victory for the NPP. Efforts to live up to this anti-corruption title have been largely seen as ineffective.

The ideological differences between the two parties, like in several other African states, are insignificant.

The establishment of the Office of the Special Prosecutor to investigate corruption cases and a “clean-up” of the banking sector, which has cost the country an estimated GHS 22 billion (USD 3.7B), have done little to dispel the perception of corruption. On the contrary, Martin Amidu, the Special Prosecutor appointed by the president tendered his resignation last month following claims of government intimidation following an anti-corruption assessment of a controversial government proposal on how national gold revenue should be invested. That was the latest in a long list of corruption scandals that the incumbent government has been entangled in.

Effectively, Afrobarometer reports an increase in perceived corruption amongst the Ghanaian populace. One author has thus referred to the elections as a choice “between a crocodile and an alligator”. The Economic Fighters League, a movement for economic justice in Ghana, have thus embarked on a campaign to persuade voters to withhold their votes in protest of the corruption and to delegitimise the outcome of the elections. The success of their campaign will send a clear signal to the eventual winner that the culture of impunity that has plagued Ghanaian politics will no longer be countenanced.

However, the prospects of a successful boycott look bleak.

Whereas the atmosphere in the country is relatively calm and the post-election situation is expected to be no different from the six other times Ghana has headed to the polls since the country’s return to democracy in 1992, Ghanaians must be cautious not to get complacent and must be geared, even as they exercise their ballot, to look beyond physical violence and hold whichever candidate who emerges victorious to account for the ways their actions and inertia enable structural violence to manifest in the lives of Ghanaians.

This issue brief was provided by

Sam Kwadwo Owusu-Ansah | Research Analyst, Transnational Policy | s.o@borg.re

Our issue-briefs provide commentaries on knowledge surrounding a current relevant local or transnational discussion.

The opinions expressed are the sole responsibility of the authors and do not necessarily represent the official position of borg.

The ideas expressed qualifies as copyright and is protected under the Berne Convention.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is notified.

\u00a92020 borg. Legal & Policy Research

Prospects of CBN’s New Diaspora Foreign Exchange Remittances Policy.

2020-12-06T07:23:21+00:00

Nigeria is the largest recipient of diaspora remittance flows with $23.8 billion in 2019. The Central Bank of Nigeria (CBN) recently announced the amendment of procedures for receipt of diaspora remittances. In this Issue-Brief, we look at what the policy dictates and some of its prospects.

Issue-Brief | Oluwatobi Olakanye

The Central Bank of Nigeria (CBN) recently announced the amendment of procedures for receipt of diaspora remittances. The new policy signed by The Director, Trade and Exchange Department, Dr. Ozoemena Nnaji kicked off on the 4th of December, 2020.

The CBN introduced this policy to provide a more convenient channel for Nigerians in Diaspora to remit funds back to Nigeria and after consultations and engagements with relevant stakeholders over smooth implementation. This comes as the World Bank recently predicted that inflow of Diaspora remittance to Nigeria would drop by $2 billion in 2020 to $21.7 billion as against the $23.8 billion the country recorded in 2019 due to the COVID-19 pandemic and the recent economic crisis. Although, Nigeria remains the largest recipient of remittances in the region as it helps to reduce the impact of the economy on Nigerian households and aids foreign exchange. For reference, Naira made big gains on the announcement of the new policy appreciating to close to N470/$1 at the black market.

Speaking at a press conference, CBN Governor, Mr Godwin Emefiele stated that the policy will ensure that recipients of remittance inflows are able to receive their funds in the designated foreign currency of their choice. This is at variance with the previous policy, where inflow through licenced International Money Transfer Operators (IMTOs) such as Western Union, Moneygram, Interswitch and Ria services was paid to beneficiaries in Naira. He said that the IT systems of the IMTOs and the Deposit Money Banks (DMBs) had been configured to begin such remittances from the 4th of December, 2020.

What Exactly Does This Policy Dictate?

The policy allows recipients of remittance inflows to receive their funds in the designated foreign currency of their choice either through commercial banks or IMTOs. The policy gives beneficiaries more access to such foreign currency proceeds, either in cash and/or in their domiciliary accounts. Nigerians who receive foreign transfers through IMTOs can now withdraw in dollars and sell at the black market rate.

Previously, inflow through IMTOs was paid to beneficiaries in Naira. Export proceeds domiciliary accounts will continue to be operated based on existing regulations, which allow its holders use of their funds for business operations only, with any extra funds sold in the Investors & Exporters’ Window. Where accounts are funded by cash lodgments existing regulation will continue to apply.

Prospects Of The Policy

In Africa, Nigeria is the largest recipient of diaspora remittance flows with $23.8 billion in 2019. If the current annual remittance inflow projection of about $24 billion holds, it could help in improving the balance of payment position, reduce dependence on external borrowing and mitigate the impact of COVID-19 on forex inflows into the country. There will be greater ease and volume of remittance to struggling families from Nigerians in the diaspora. The policy helps deepen the foreign exchange market and provides more liquidity while creating more transparency in the administration of Diaspora remittances into Nigeria. The policy could help finance a future stream of investment opportunities for Nigerians in the Diaspora while also guaranteeing that recipients of remittances will receive a market-reflective exchange rate for their money.

It could result in a huge flow of income into the economy thereby aiding foreign exchange trading and the Naira’s position in the market. The Naira made strong gains at the announcement of the new policy. If the current projection holds, deposit money banks will soon have no need to call on the central bank to provide dollar to fund their imports or commercial operations. They will become independent as regards foreign currencies.

It could also aid the overall development of the economy by the injection of more disposable income from the diaspora to struggling families and households in Nigeria. With increased transparency, the CBN will have improved capabilities to monitor transactions, forestall money laundering and prevent the adverse effect of dollarisation in our economy.

This issue brief was provided by

Olakanye Oluwatobi | Research Analyst, Revenue | o.o@borg.re

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